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TBQ - North Atlantic hurricane season 2024

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The Big Question: The North Atlantic hurricane season 2024 what can we expect?

31.05.24 The Big Question

The impact of the changing climate in the world’s weather is never far from the thoughts of the world (re)insurers.

The global insurance industry has seen four straight years where insured losses have surpassed the $100 billion market and that is without an exceptionally costly North American Hurricane season. However, there are concerns that the year ahead may see a change.

Experts at the University of Pennsylvania and colleagues have annually combed through historical weather data, reviewed current oceanic and atmospheric conditions, and applied computational modelling to forecast coming hurricane seasons.

This year their prediction for the 2024 North Atlantic season, which spans from 1 June to 30 November, is for an unprecedented 33 named tropical cyclones, with the number potentially ranging between 27 and 39.

The prediction does not deviate from many of the others which have been published in recent months. Many say it is down to particularly high sea surface temperatures in the North Atlantic Main Development Region (MDR), which, have been recorded at more than 1.9°C above average according to NOAA’s Coral Reef Watch. In addition, the forecast incorporates the anticipated development of moderate La Niña conditions.

Ian Summers, Global Business Development Leader, AdvantageGo

Rich Coyle, US commercial director of FloodFlash, says La Niña is coming and could supercharge the Atlantic hurricane season.

He explains: “Climate experts warn that this year’s North Atlantic hurricane season has the potential to bring a record-breaking number of named storms – and that the weather phenomenon La Niña is to blame.”

The season, begins next week, but Coyle points out many businesses don’t have adequate insurance coverage to protect themselves from the ensuing damage.

“A relatively uneventful 2023 season with only one major hurricane making US landfall (Idalia), combined with a significant rise in property premium rates, led to many businesses in exposed US Atlantic and Gulf states deciding to self-insure portions of their named windstorm exposure,” Coyle continues. “However, recent predictions of a hyperactive 2024 hurricane season are leading many insurers to opt for more appropriate levels of risk transfer this time around.

“The climate pattern La Niña, which occurs every two to seven years, starts in the Pacific Ocean and can affect weather worldwide. During La Niña, the Atlantic experiences: weaker trade winds, weaker vertical wind shear, and less stability in the atmosphere, which leads to more frequent and severe hurricanes.”

Federal weather forecasters from the National Oceanic and Atmospheric Administration (NOAA) recently said chances of La Niña forming by the Autumn are now at 85% – and worryingly, a 69% chance it will develop by the summer. Strong El Niño patterns, like the latest, lead to greater impacts from a following La Niña. Two prominent forecasters, Colorado State University and Tropical Storm Risk, are aligned in predictions of 23 named storms, 11 hurricanes and 5 major hurricanes. This compares to a 30-year historical average of 14, 7 and 3 respectively – a compelling reason for risk managers to be particularly wary ahead of June 1.

“Hurricanes produce severe flooding in two main ways,” Coyle explains. “Storm surge is water from the ocean that is pushed toward the shore by the force of the winds swirling around the hurricane, for example, Ian (2022), Irma (2017) and Sandy (2012). “Catastrophic rainfall can also result from lower intensity hurricanes, for example, Harvey (2017) and Ida (2021, North East).

“There is a pressing need for businesses and individuals to buy coverage to protect their property and income – and it’s not too late to do so. But many carriers have restricted appetite for flood, leaving a gap in the market, and traditional flood insurance is unaffordable for many businesses in high risk areas.”

He adds parametric flood and parametric wind insurance provide a solution for risk managers as we go into hurricane season.

“Parametric wind alone is not enough as it typically only covers category three and above hurricanes,” Coyle says. “The problem is that lower category hurricanes and tropical storms cause a great deal of flood damage and prolonged business interruption.

“Combining flood and wind parametric protection means the insured is covered for wind damage to roofs, windows, exterior walls, and so on, as well as flood damage from storm surge and catastrophic rainfall that cause property, contents and equipment damage at lower levels, as well as business interruption.”  

A case in point is Hurricane Harvey, which devastated Houston and surrounding areas in 2017. Insureds with just parametric wind coverage would have been left exposed. Harvey hit the coastline as a category four hurricane 30 miles northeast of Corpus Christi but weakened quickly to a tropical storm. Harvey then stalled over South Texas for days, producing North American record levels of rainfall, causing catastrophic flash and river flooding.

“Houston businesses with wind parametric policies would not have triggered a payout, but flood parametric policies with on-site sensors would have,” adds Coyle. “There is still time to consider flood and wind parametric solutions for the 2024 hurricane season. Last year, it was fairly common for insureds to go bare or self-insure significant named windstorm exposures, due to lack of capacity and rate increases being pushed through by the property carriers.

“With property premiums stabilising in 2024 and businesses heeding recent warnings about this hurricane season being the busiest on record, we’re seeing these same insureds do a U-turn on self-insurance and opting for parametric risk transfer.”

Coyle concludes: “Our message to insureds in coastal regions and those who find it difficult to find traditional cover, including golf courses, construction sites and open-lot vehicle dealerships, is to explore parametric insurance as a viable, affordable and efficient named windstorm coverage solution.”

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