Countdown to the end of hurricane season is on
After Q3 events overshot (re)insurer’s cat budgets, the industry is willing the rest of the year to show some respite as the final weeks of hurricane season play out.
Reassuringly, the industry is likely through the worst of this year’s Atlantic season – if monthly trends from the last three decades hold for the remainder of 2021.
Analysis by Insurance Insider of data collected by the US National Oceanic and Atmospheric Administration (NOAA) – and published by commercial weather service Weather Underground – shows that since 1991, only four major Atlantic hurricanes have begun during the months of November and December.
Further, in total over this 30-year period, there have only been 38 named storms of any class originating in the Atlantic during the final two months of the year.
At the beginning of 2021, the NOAA’s Climate Prediction Center updated the period of record against which it determines whether a given hurricane season is above or below average, adopting the 30 years between 1991 and 2020 as its new baseline.
Over this period, a major hurricane – that is, a storm classed as Category 3 or above on the Saffir-Simpson Wind Scale – only occurred in November or December approximately once every eight years.
None of the four recorded hurricanes of this strength made landfall in the United States, with two – Lenny in 1999 and Paloma in 2008 – passing through the Caribbean and two hitting Central America.
Category 3 Otto (2016) and Category 4 Iota (2020) struck Nicaragua four years apart, with the latter storm causing much more significant damage.
According to Aon’s Impact Forecasting team, Iota – following shortly after Eta, another Category 4 storm in the region, which began on 31 October – resulted in $1.4bn of economic losses (at 2021 prices) to infrastructure in the country and the Colombian islands of San Andrés and Providencia off its coast.
However, only a tiny proportion of these losses – $53mn, equivalent to just under 4% – were insured.
One of the notable US-landing storms in November was 1985’s Kate, which hit the Florida panhandle at Category 2 strength and remains the latest US landfalling hurricane on record, arriving on the 21st of the month.
Seasonal activity lines up with forecasts
If activity levels for the remainder of the year are indeed in accordance with historical precedent, overall levels of activity for 2021 will be in line with the updated season forecast the NOAA issued in early August.
The organisation estimated that the number of named storms would fall in a likely range of 15 to 21, with seven to 10 of those becoming hurricanes and three to five becoming major hurricanes.
While the total number of named storms so far this year (21) already sits at the top end of its estimated range, the numbers of total and major hurricanes – seven and four respectively – are comfortably within the guidance the NOAA provided.
Those estimates – and these actual outcomes – are consistent with an “above-average” Atlantic season relative to the new 1991-2020 baseline. Over that 30-year period, there were on average 14 named storms, seven hurricanes and three major hurricanes annually.
The most significant Atlantic hurricane to make landfall so far in 2021 has of course been Hurricane Ida. Overall insured losses relating to the storm - which caused extensive damage both in Louisiana and the Northeast of the USA – are estimated to be in excess of $20bn.
Preliminary analysis of third-quarter earnings releases by this publication earlier this week indicated that a significant portion of this burden has fallen on Bermudian carriers, with RenRe, Everest Re and Axis all reporting net losses from the hurricane equivalent to more than 3% of their total equity.