The Atlantic hurricane season, which officially begins June 1, invites a variety of predictions from multiple reputable sources to weigh in on the severity and number of tropical systems. The difficulty this year is in predicting how the transition from a “super El Niño” to a “La Niña” will affect hurricane formation. Although there is an unusual high degree of uncertainty in this year’s predictions, Allianz Global Corporate & Specialty (AGCS) Catastrophe Risk Management finds that most sources predict an above average hurricane season and outlines four crucial areas of windstorm loss mitigation.
June marks the official start of the Atlantic hurricane season, which lasts until November 30, beyond which typical tropical storms usually do not form. Already 2016 is an anomaly: on January 13, Hurricane Alex formed, the first January hurricane in the Atlantic basin in 61 years and only the second on record bumping up the start of the season by five months. Nature doesn’t follow a manmade schedule, of course. Hurricanes can – and do – form at any time of the year, providing the conditions are right. And climate change seems to be providing the necessary catalysts to fuel more anomalous and intense storms, if fewer in number.
Hurricane Alex was the first January hurricane in the Atlantic basin for over 60 years.
Most scientists agree that the severity of windstorms will increase in the future. As related in the AGCS publication Hurricane Katrina 10: Catastrophe management and global windstorm peril review, the severity of losses from weather events including windstorms is increasing. The average amount paid by insurers for extreme weather events including windstorms in the decade between 1980 and 1989 totaled $15bn a year. Between 2010 and 2013 this increased to an average of $70bn a year. While scientists cannot provide a conclusive answer to the question of how climate change impacts storms, most agree severity of windstorms will change in future.
What will 2016 bring? According to the US National Hurricane Center there’s a 45% chance that this season will be a “near normal” one and a 30% chance that it will be above-normal. Since 1950, there has been an average of six hurricanes, three at a Category 3 or higher (see table below). In addition to Alex, Tropical Storm Bonnie also formed ahead of the official June 1 season open.
Impact of hurricanes on insurance
Insurers are interested in forecasting because hurricanes are a global peril causing billions in losses and accounting for 40% of natural hazard claims. Between 2009 and 2013, windstorm losses ranked fifth in the top 10 causes of commercial loss by claims value, according to analysis by AGCS.
Meteorological extreme events, and specifically hurricanes that make landfall, have the potential to generate significant onshore and offshore losses for the insurance industry, as seen with both Hurricane Katrina in 2005 and Superstorm Sandy in 2012, which are among the top Allianz loss-causing hurricanes to date.
By analyzing storms and gleaning lessons learned, the industry can positively impact insureds and their property.
Andrew Higgins, Technical Manager, Americas, Allianz Risk Consulting, explains that with more and more storm monitoring data, the ability to model future storms gets more accurate. After Katrina, for example, the industry learned important lessons about the impact of storm surge on resulting damage. Other issues, such as the flooding of levees and neglected infrastructure, as well as the lack of attention paid to building codes, led to devastation. “Today,” says Higgins, “the Gulf Coast is in a better position to withstand the effects of a hurricane due to better education, improved construction guidelines and increased third party inspection.”
The AGCS Catastrophe Risk Management team analyzes available predictions each season to come up with an analysis which they share with underwriters, risk engineers and other interested internal parties. From the range of predictions, they get a leg up on what to expect as the year goes on. The externally sourced predictions sometimes fall short and other times are spot on.
In 2015, for example, the majority of predictions called for a below-normal Atlantic hurricane season, which was confirmed by a lack of tropical windstorms that year. Only one* major hurricane, (Joaquin), made landfall, with limited insurance losses.
The lackluster season was due to an especially active “super El Niño”, characterized by warmer than normal ocean water that develops in the central and east-central equatorial Pacific and shears formation of much of the tropical activity in the Atlantic.
By contrast, a La Niña event is characterized by opposite impacts to those of El Niño and often portend more active tropical events that tend to suppress hurricane activity in the central and eastern Pacific basins and enhance it in the Atlantic basin. Most scientists agree that we are moving from a super El Niño into a La Niña set-up this year, but there is uncertainty as to what degree and when.
Factors in an uncertain 2016 tropical season
While most seasons carry a degree of unpredictability, predictions for the coming year have an unusually high degree of uncertainty. One reason is the fact that the Atlantic windstorm activity is thought to be affected by the El Niño and La Niña phenomena, which are associated with the warming and cooling of water in the central Pacific Ocean. During the first months of the year, it was not yet clear if the current weakening El Niño would transition to either neutral or La Niña conditions by the peak of the Atlantic hurricane season. By May, however, the US National Oceanic and Atmospheric Administration (NOAA) assigned a 70% probability of a transition into La Niña condition, although there is uncertainty concerning the strength of La Niña.
Another factor of uncertainty is connected to whether the current high-activity era of Atlantic hurricanes will lead into a low-activity era. The former active period started in 1995. These typically last 25 to 40 years and are associated with a warm phase of the Atlantic Multi-Decadal Oscillation (AMO), which is an ocean current thought to affect the sea surface temperature of the North Atlantic Ocean over a period of several decades. It is associated with changes in the frequency of North American droughts and reflected in the frequency of severe Atlantic hurricanes. The last three years have indicated a shift towards a cool AMO phase, but there is no clarity if this shift is short-lived or if it is the initial phase of a low-activity era.
Hence, both the El Niño/La Niña transition and the AMO transition particularly challenge experts predicting the 2016 hurricane season. The majority of sources, however, predict an above average one.
According to analysis released by Global Weather Oscillations, an independent weather prediction company, the coming season might be the strongest in over four years with a higher than normal number of United States hurricane landfalls.
North Carolina State University forecasters predict that the US East Coast should expect an active hurricane season, while normal ranges should occur in the US Gulf Coast.
The Weather Research Center, a Houston, Texas, non-profit educational center, predicts that the Gulf of Mexico coast along the west coast of Florida and the Texas coast has the highest risk of experiencing landfall of a tropical cyclone this year, which might also affect Mexico oil leases.
The latest NOAA released outlook predicts that there is a 45% chance of a near-normal Atlantic hurricane season. However, there is also a 30% chance of an above-normal season and a 25% chance of a below-normal season.
The below table provides a composite of reputable meteorological organizations and their predicted number of events for 2016. The table reflects the high deviation in forecasts among all of these organizations.
Seasons are rated below normal, near normal, and above normal with respect to the average of tropical storms, hurricanes and major hurricanes that have been formed in one year over the time period 1950-2015.
2016 Hurricane Season predictions (composite)
|Source||Tropical Storms||Hurricanes||Major hurricanes (category 3+)||Forecast publish date||Rating|
|11||6||3|| Jan 16
||Long-term norm (1950-2015)|
|Global Weather Oscillation||17||9||4
||Apr 16||Above normal|
|Tropical Storm Risk (University of London)||13-21||6-12||2-6||May 16||Above normal|
|North Carolina State University||15-18||8-11||3-5||Apr 16||Above normal|
|Accuweather||14||8||4||Apr 16||Above normal|
|MDA Weather Services||14||7||3||Apr 16||Above normal|
|UK Met Office||10-18||6-10||-||May 16||Above normal|
|NOAA||10-16||4-8||1-4||May 16||Near normal|
|Colorado State University||10||6||2||Jun 16||Near normal|
|Weather Research Center||7-10||4||1||Apr 16||Below normal|
North Atlantic tropical windstorm activity (since 2010)
|Year||Tropical storms||Hurricanes||Major Hurricanes||Examples of major hurricanes, which made landfall|
|19||12||5||Earl, Igor, Karl|
* Hurricane Patricia, a Category 5 storm that impacted Mexico, formed in the eastern Pacific and technically was not considered an Atlantic storm.