Friday, June 2, 2017

Insurance: 2017 Hurricane Season Updates

From Artemis, May 30:

TSR ups hurricane activity forecast, Accuweather warns on landfall potential
Tropical Storm Risk has increased its forecast for 2017 Atlantic Tropical Storm & Hurricane Season activity, joining others in predicting a more active year. Meanwhile Accuweather is warning of landfall risks for the United States coastline and early season storm potential.

Earlier this year, Tropical Storm Risk (TSR), the climatological research group backed by University College London, Aon Benfield, and Crawford & Company, and other forecasters of Atlantic tropical activity were reducing their forecasts in the expectation that we would see a weak El Niño form by the time of the typical peak of the season, suggesting a slower year for activity.

The El Niño forecasts have moved somewhat and perceptions of the state of sea surface temperatures have also adjusted in recent weeks, meaning that most forecasters are increasing their predictions for 2017 hurricane activity in their latest updates.

Lower hurricane forecasts are positive for reinsurance and ILS interests, although just one major storm would be required for traditional reinsurers to suffer a major impact to their capital adequacy, while ILS and catastrophe bond investors could face significant claims.
TSR had forecast that the 2017 season would see 11 named tropical storms, 4 hurricanes and 2 major hurricanes of category 3 strength of greater.

This has now been increased to 14 tropical storms, 6 hurricanes and 3 major hurricanes, which is more aligned with the longer term averages and very close to the recent 10 year climate norm.
Professor Mark Saunders and Dr Adam Lea explained the change in forecast; “The TSR forecast has increased since early April 2017 due to the recent trend towards negative North Atlantic Oscillation conditions which favour warmer hurricane main development waters in August-September, and to the decreased likelihood that El Niño conditions will develop by August- September.”

Adding the latest TSR prediction into our tracked forecaster mix gives us an increased Artemis average forecast for the 2017 hurricane season of 12.3 named storms, 5.7 hurricanes and 2.6 major hurricanes.

The forecasters at TSR explained that the changing view of El Nino potential for 2017 means; “There is an increased likelihood for lower trade wind strength, increased vorticity and lower vertical wind shear where hurricanes form; factors which all translate into increased hurricane activity.

However, they warn that both factors, El Nino and warmer sea surface temperatures, contain significant uncertainty, particularly; “Whether El Niño conditions will develop and how warm the tropical North Atlantic will be in August-September.”...MORE
Here is the current Sea Surface Temperature Anomaly map from Unisys Weather. Notable points are 1) the equator off South America's bulge: No El Niño  yet and 2) the heating off the U.S. East Coast which, if it remains, could be fuel for storms turning up the eastern seaboard.