The U.S. NOAA recently issued an official La Niña watch stating that conditions were favourable for the phenomena to develop within six months, which could result in higher losses for the insurance and reinsurance sector, according to Andrew Siffert of BMS Intermediaries Inc.
Following the decline of the recent El Niño phase forecasters predicted a 50% chance of a La Niña event developing, with the U.S. NOAA now warning that “conditions were favourable for La Niña to develop within the next six months.”
And according to Siffert, Assistant Vice President and Senior Meteorologist of BMS Intermediaries Inc., the transition into a La Niña phase could result in higher losses for the insurance, reinsurance, and possibly even the insurance-linked securities (ILS) market.
Should La Niña develop, “Expect higher losses,” said Siffert, adding that, “historical insurance industry losses suggest worldwide impacts, but likely these impacts won’t be fully felt until 2017 when the La Niña is fully developed.”
“Although insurance loss data suggest on average a La Niña year sees about double the insured loss that might occur during El Niño years, the reason for increased losses may have more to do with the location of the losses than the severity of the storms,” continued Siffert.
Siffert explains that during a La Niña phase or neutral season the U.S. experiences a greater number of hurricanes. In fact, data reveals that on an annualised basis since 1950, “major hurricane landfall rates during La Niña years are 20% higher than neutral conditions and almost 280% higher than El Niño rates.”
But it’s not just hurricanes that can be seen to increase in activity during a La Niña phase, explained Siffert speaking with Artemis, as data shows that historically, most large outbreaks of U.S. tornadoes occur during La Niña years.
In fact, Siffert claims that, “In term of the U.S. strongest tornadoes (the EF 5) 25 have occurred during La Niña – 18 Neutral Conditions and 15 during El Niño,” so an extra 10 events during the La Niña phase.
As noted earlier by Siffert the location of storms during a La Niña phase could be a reason for increased losses, with the weather pattern seeming to favour stronger storms over the Southeast of the U.S., also known as Dixie alley....MUCH MORE
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