Risk Management Solutions predicts hurricane activity to increase losses by 40 percent

Risk Management Solutions, Newark, Calif., expects increases in hurricane landfall frequencies will increase modeled annualized insurance losses by 40 percent on average across the Gulf Coast, Florida and the Southeast, and by 25 to 30 percent in the Mid-Atlantic and Northeast coastal regions.

The new view of risk is driven by an increase of more than 30 percent in the modeled frequency of category 3-5 hurricanes making landfall in the United States to account for current elevated levels of hurricane activity in the Atlantic basin for at least the next five years. When compared with a pre-2004 historical baseline that had been previously used for quantifying insurance risk, the increases in modeled annualized losses are closer to 50 percent in the Gulf, Florida, and the Southeast.

The increased frequency and intensity of hurricane activity in the Atlantic Ocean Basin are driven by higher sea surface temperatures in the tropical North Atlantic and by associated changes in atmospheric circulation. Warmer temperatures are expected to increase the potential for hurricanes to make landfall at higher intensities in the next five years.

RMS consulted with representatives from all segments of the insurance industry and updated its U.S. and Caribbean hurricane models to provide a five-year forward-looking view of risk for estimating potential catastrophe losses. Catastrophe model results have historically been based on a long-term historical average baseline, the company said.

The RMS medium-term view of hurricane activity was developed with experts in hurricane climatology: Dr. Jim Elsner of the Department of Geography, Florida State University; Dr. Kerry Emanuel of the Department of Earth, Atmospheric and Planetary Sciences, Massachusetts Institute of Technology; Tom Knutson, Research Meteorologist, Geophysical Fluids Dynamic Laboratory, Princeton University; and Dr. Mark Saunders of Climate Prediction, Department of Space and Climate Physics, University College London.

“Considerable scientific debate on the reasons for the high state of current hurricane activity continues among leading climatologists, between those who view natural, multi-decadal variability as the principal cause and those who also see a significant influence of global warming,” said Dr. Robert Muir-Wood, chief research officer at RMS. “While the experts convened by RMS hold different climatological perspectives on the underlying causes of elevated hurricane activity, they agreed unanimously that a forward-looking view of risk should reflect a higher probability of land-falling hurricanes than is represented by long-term historical averages.”

“Our clients should manage their risks in a manner consistent with elevated levels of hurricane activity and severity,” said Hemant Shah, president and CEO of RMS.

Topics Florida Trends Catastrophe Natural Disasters Profit Loss Hurricane Risk Management