Hurricane Katrina could be the most expensive catastrophe in American history. The cost to recover from Katrina will probably exceed what America spent on the Marshall Plan to rebuild Europe after World War II. Hurricanes Rita and Wilma added to the misery of the Gulf States and to the bill faced by taxpayers and consumers.

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Florida was slammed by an unprecedented four major hurricanes during a six-week period in 2004. One of every five homes in the state sustained damage, and over $20 billion was paid in insurance claims.

Hurricane Andrew by itself caused $20 billion in insured damages in 1992. If Andrew had veered north and hit Miami with the same force it struck Homestead, damages might have exceeded $50 billion.

Hawaii and every state along the Eastern Seaboard and Gulf of Mexico face the threat of a major hurricane or multiple hurricanes every year. America’s deadliest natural disaster occurred in 1900, when a hurricane devastated Galveston, Texas, killing 6,000 of the island’s 36,000 residents.

Two massive hurricanes hit New York and the Northeast in 1821 and 1938. The 1938 storm veered north from the Carolinas and missed Manhattan by only 55 miles — a close call in meteorological terms. Scientists agree a direct hit would have devastated the city, but despite the near miss, 600 people died, and the hurricane caused more than $300 million in damage (1938 dollars). Hurricane modelers report that if a storm of this magnitude were to hit New York City and the surrounding areas now, it would cause tens or even hundreds of billions of dollars in damage. Read more on the hurricane threat to New York.

America could be better prepared for a truly catastrophic hurricane.

The U.S. Government Accountability Office (GAO) released a report in February, 2005 that underscores the nation’s lack of preparedness for a major catastrophe and warns that, ‘a major event or series of events surpassing the over $20 billion in losses in Florida resulting from the 2004 hurricane season could severely disrupt insurance markets and impose substantial recovery costs on governments, businesses, and individuals.’

To reduce the risk of insolvency, insurance companies in Florida have been forced to limit their exposure to catastrophic hurricane losses. The state of Florida manages both the Citizens Property Insurance Corporation, which offers homeowners insurance to those who can’t find insurance from a private company, and the Florida Hurricane Catastrophe Fund, which acts as a backstop to help private insurers manage their exposure to hurricanes.

While legislation is needed to improve consumer protection in Florida, the actions taken by the state of Florida in the wake of Hurricane Andrew stabilized the insurance market and made it possible for Florida to sustain its economy in the wake of one of America’s worst catastrophes.

A Category 5 hurricane that strikes a populated area could cause $50 billion in damage or more. A catastrophe of that magnitude would have national economic implications. Insurance would become more expensive and more difficult to find, with some consumers unable to find insurance at any price. We can protect America from the economic consequences of a major hurricane or series of hurricanes by preparing in advance.

Americas can do a better job preparing for and protecting her citizens from a catastrophic hurricane or series of hurricanes.