After an intermission necessitated by Hurricanes Isaac, Leslie and Michael, today, we resume our Hurricane Andrew series with a post from Steve Weinstein, SVP RenaissanceRe Holdings Ltd. and Chairman, RenaissanceRe Risk Sciences Foundation. Mr. Weinstein shares how Andrew changed everything from building codes to risk management to insurance claims handling and led to the creation of RenaissaneRe a business that has a mission to “better serve clients and at-risk communities.”
When Hurricane Andrew made landfall in 1992, our company, RenaissanceRe Holdings Ltd., did not yet exist. Nor did many of the large, technically sound, publicly traded market participants we compete with today. Management teams in our industry tended to believe that even extreme natural catastrophes were unlikely to give rise to more than $2 billion or so of insured losses; and accordingly, since the exposures were not deemed to be material, boards of directors and other key stakeholders of primary insurers and ultimate insureds devoted relatively little time to oversight of natural catastrophe risk. The science of catastrophe modeling was in its infancy, and the art of deploying models for risk management was nascent.
Andrew, and twenty subsequent years of consistent innovation, changed all that.
By the summer of 1993, RenaissanceRe was in business, with a mission to deploy recent innovations in portfolio optimization, catastrophe modeling, dynamic risk management and other emergent sciences to better serve clients and at-risk communities. In particular, we believed from our outset that a commitment to developing and utilizing expertise in risk modeling and analysis would help us both to underwrite risk effectively and offer fairly priced, consistent capacity for some of the world’s most perilous regions, including the US Southeast. We were quickly joined by numerous competitors, some well-established firms, and by many new entrants, principally in the growing reinsurance market hub of Bermuda.
After the 9/11 tragedy and the large storms of 2004/2005, including Hurricane Katrina, new waves of capital and new competitors emerged to support catastrophe-exposed and other risks. Many, if not all, of these competitors have embraced stochastic modeling, hazard-oriented risk analysis, and portfolio management techniques to enhance risk management and client service. Successful modeling firms, university and government projects, and a generation of professionals have fostered accelerating innovation and enhancement of catastrophe modeling and risk perception.
But it is the depth of commitment to catastrophe risk analysis and to fostering a companywide risk management culture at RenaissanceRe that we believe is unique; it is both deep and broad across our organization. Dedicated efforts to increase awareness about risk mitigation and encourage resiliency through the widespread adoption of effective mitigation strategies have been key components of RenaissanceRe research initiatives from our outset. Among our other initiatives, in 2004 we partnered with the International Hurricane Research Center at Florida International University – not far from where Andrew made landfall – to develop a revolutionary testing facility: the RenaissanceRe Wall of Wind. Fully operational since 2007, the RenaissanceRe Wall of Wind generates 125 mph winds and associated rain to which full-scale structures can be subjected, and has served as a model for other important industry-supported initiatives.
In 2008, in partnership with FLASH®, State Farm® and Simpson Strong-Tie, we launched our award-winning attraction at INNOVENTIONS at Epcot® at the Walt Disney World® Resort. Since its opening, “StormStruck: The Tale of Two Homes™”, an interactive exhibit combining “edutainment” with the exhilaration of experiencing what it might feel like to be in a severe storm, has communicated to millions of attendees cost-effective steps they might take to make their homes more resilient to windstorms.
Very few events can truly be called “game changers.” But even with two decades of hindsight, Hurricane Andrew was indeed just that. From building codes to modeling, from risk management to reinsurance, from construction to claims handling, no field of endeavor touched by Andrew was unchanged by it. At RenaissanceRe, as we plan for our next two decades, we remain more committed than ever to working with clients, at-risk communities, policy-makers, academic experts and other interested parties to further develop ever more effective approaches to managing the increasing risks of hurricanes and other natural catastrophes.