Hurricanes: Where we’ve been, and where we’re going

This article explores the extended outlook for hurricane activity and what insurers can do to stay ahead of the rising threat.

Development is consuming significant acreage in farmland and coastal wetlands that helped to shield urban areas from Gulf waters during hurricanes. (Credit: EvgeniyQW/Adobe Stock)

Hurricanes provide a window into the potential effects of climate change as it progresses. Steadily increasing atmospheric CO2 helps to warm the air and the oceans, and those rising temperatures provide more potent fuel for developing tropical cyclones. Meanwhile, temperatures are climbing even faster at the poles than at the equator, which recent research links to changes in atmospheric steering currents and potential reductions in vertical wind shear, muting an inhibiting factor for hurricanes.

Other factors may tend to dry and stabilize the atmosphere. Still, long-term studies generally point to more frequent severe storms over coming decades, reflecting more CO2 in the atmosphere. Given a sustainability scenario provided by the latest IPCC report, also known as SSP 1-2.6, “taking the green road” if governments and societies manage to reduce CO2 emissions and limit the average global temperature rise by about 1.7ºC by 2050, still insurers’ average annual losses (AAL) are expected to increase by more than 20% compared to 2021 AALs, based on U.S. hurricane climate change projections.

This article explores the extended outlook for hurricane activity and what insurers can do to stay ahead of the rising threat.

Looking back for a glimpse of the future

Tying any specific storm’s severity to climate change’s effects is hard, but the overall trend is more evident. And as Hurricane Ian swept across Florida and moved on to South Carolina in 2022, the importance of seeing the long-term picture was clear. Ian was vast and slow-moving as it traversed unusually warm sea surface temperatures — all potential traits of future hurricanes as the climate warms.

Extraordinary, record-breaking rainfall totals and flooding were among the results, along with 150-mph winds at landfall, a dozen tornadoes, and remarkably persistent strength even 100 miles inland. Storm surges approached or exceeded records at multiple locations.

Where Ian struck, demand surge significantly affected claim costs. From September to October, Florida and South Carolina saw the largest monthly changes in residential and commercial reconstruction costs — respectively; 3.87% and 2.84% for residential and 3.86% and 2.40% for commercial, according to Verisk data.

One positive that emerged in Ian’s wake was the effectiveness of strengthened building codes and enforcement resulting from decades-long efforts. But there are other challenges to resiliency, such as continued growth in vulnerable areas along the Gulf and Atlantic coasts. Four counties most affected by Ian have grown 150% or more since 2004. Development is consuming significant acreage in farmland and coastal wetlands that helped to shield urban areas from Gulf waters during hurricanes.

Meeting market complexity with data

Ian’s arrival also coincided with upheaval in the Florida property market, where insurance buyers faced an availability and affordability crisis driven by roof claims. Legislation enacted in 2022 was designed to mitigate some of the issues. But the complexities of the market highlight how critical it is for insurers to employ data-driven analytics to understand and manage portfolios and risk appetites. Vital considerations for Florida data may include timeliness, multiple angles on roof risk, and the selection of trustworthy data sources.

At a higher level, the ability to map potential changes in average annual losses and other loss metrics can help insurers and reinsurers to assess, mitigate, and adapt to rising exposure and changing regulations across business lines and portfolios.

Dr. Jeffrey Strong joined Verisk in 2019 as a research scientist in tropical cyclone hazard modeling on the extreme event solutions team at Verisk. He holds a PhD and an MA in atmospheric and oceanic science from Princeton University, and a dual BS in environmental science and mathematics from the University of Virginia.

Read the previous articles in this series: