Have record-breaking hurricane seasons become the new normal?
The National Hurricane Center recently forecast another above-normal Atlantic hurricane season in 2021.
Among the many reasons that 2020 stood out was the year’s record-breaking hurricane season.
The season brought 30 named storms, exhausting the regular list of names and moving on to the Greek alphabet for the second time ever. (The first time was in 2005.) Eleven of those storms made landfall in the U.S., and six of those were at hurricane intensity.
Between May and November 2020, at least some part of the Gulf or Atlantic coastlines were under some sort of tropical weather-related warning. The only silver lining — if we can call it that — was that most storms made landfall in less developed areas, causing approximately $18 billion in insured losses.
Despite its relatively moderate financial impact, the season was still cause for concern for several reasons:
- Aging infrastructure, particularly in the Northeast. Hurricane Isaias, which struck North Carolina and then moved up into the Northeast as a tropical storm, caused significant damage to the telecommunications and power infrastructure. In some areas, it took longer than a week for power to be restored.
- Inland impacts increased. Hurricanes have commonly been thought of as coastal storms, with coastal cities and beaches suffering the most damage. But in 2020, atmospheric nuances and the speed at which these storms were moving, brought some significant impacts inland. Hurricane Isaias moved through New Hampshire with wind gusts of 147mph. Hurricane Laura caused tropical storm and hurricane-force winds miles inland in parts of Louisiana and Arkansas.
- Ten hurricanes underwent rapid intensification — defined as a large drop in central pressure or a large increase in wind speed — over a 24-hour time span. Such intensification frequently occurred near the coast and continued through landfall.
Rapid intensification was the most concerning trend of the 2020 season. Such drastic changes in intensity leave virtually no time for individuals, businesses and governments to prepare for a much stronger landfall than previously expected. A large hurricane can bring damaging winds and extreme flooding, in the form of a storm surge, compared to lesser winds and lower surges by moderate tropical storms and low-end hurricanes.
Furthermore, the amount of damage — physical and economic — increases exponentially with wind intensity. Historically, 80% of the damage has been caused by around 20% of the hurricanes that made landfall at very strong intensities.
Preparing for 2021′s hurricane season
Is this a harbinger of climate change and our new normal? Was 2020 an anomaly or a sign of future regular occurrences?
While one season doesn’t make a trend, the scientific consensus is that as the world’s oceans warm, hurricanes will have more opportunities to tap into warmer waters, which is what they need to intensify. On May 20, 2021, the National Hurricane Center forecast another above-normal Atlantic hurricane season, with 13 to 20 named storms, six to 10 hurricanes, and three to five major hurricanes. Even an average hurricane season is now expected to have more named storms, with a “normal” Atlantic hurricane season now being defined as 14 named storms, seven hurricanes and three major hurricanes, based on the 1990 to 2020 basin-wide activity.
To mitigate the financial devastation of a major hurricane, businesses and government entities often rely on insurance protection. Traditional hurricane policies take care of the structural and physical damage. However, protection that responds to non-damage business interruption is often critical in the aftermath of a hurricane and is becoming increasingly more important as our economy continues to globalize and grow further interconnected.
An individual business location may be spared from the physical damage, but if the nearby infrastructure is destroyed, getting supplies, employees and customers to that business can be a problem. We often see network interruptions lasting for days and weeks, impeding our ability to work (especially if the workforce is remote) and ultimately causing a revenue loss.
Parametric insurance that pays out based on event intensity, such as experienced hurricane wind speed, instead of indemnified losses, offers expanded protection and much-needed relief for these commonly overlooked but highly impactful financial losses. Such policies have a straightforward claims process that releases the funds in a matter of days and weeks instead of months and years, meaning businesses and entities can recover faster following an event.
With the 2021 hurricane season officially here, insureds must assess their preparedness and protection gaps before it’s too late.
Dr. Megan Linkin (megan_linkin@swissre.com) is senior parametric natural catastrophe underwriter at Swiss Re Corporate Solutions.
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