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2013 Half Year Review – U.S. Extreme Weather Events

Andy Siffert, BMS’ resident Meteorologist, reviews the first 6 months of 2013 in terms of U.S. extreme weather events and their impact on the industry.

As we round the corner into the second half of 2013 we can now put into perspective some of the U.S. extreme weather events that occurred during the first half of the year. With the tally of some of these disasters still being assessed, the U.S. insurance losses estimated by Property Claims Services (PCS) will continue to rise. As of July 1, 2013 the U.S. has seen $6.8 billion in PCS claimed losses from weather events across the U.S. Considering the expected upward adjustment of claimed weather events, losses reported thus far would fall below the five-year average for first- and second-quarter weather-related losses, which total $13.1 billion. This below-average loss is primarily connected to the current “Tornado Drought” that has been ongoing since the second half of 2012. Severe convective storm outbreaks in May 2013 produced major tornadoes causing widespread damage to properties in Texas, Oklahoma, and other states. But as of July 1, the tornado count is 42% below the five-year average, with a major portion of the tornado activity occurring in the lower Mississippi and Tennessee River valleys. Given that May is peak tornado season in the Central Plains, it should be no surprise that strong and violent tornadoes formed and caused damage there. In Tornado Alley this typically occurs during the second quarter of the year, but the number of tornadic weather events in the Central Plains and Midwest regions has been below normal again this year.

The overall lower PCS loss numbers could also be a result of fewer hail events, which, according to Storm Prediction Center (SPC) storm report data, are currently 21% below normal (with only 3,714 hail reports). With the main drivers of severe convective storm losses resulting from the May 20 tornado in Moore, OK and overall hail reports below the five-year normal trend, it seems that derecho or straight-line wind events are the likely driver of most U.S. weather-related losses to-date. These events appear to be trending with the five-year SPC severe wind reports, which as of July 1 stand at 7,360 vs the five-year mid-year average of 7,369 severe wind reports.

The Black Forest wildfire in Colorado appears to be one of the most destructive fires in Colorado’s history. Because of this, wildfires have been getting a lot of media attention lately and it might be interesting to put the current wildfire season into perspective.

According to the National Interagency Fire Center, the U.S. is about a million acres below the 10-year running mean of 2.4 million acres burned in the 22,050 wildfires that have been reported. This is also 15,000 fires fewer than the 10-year running mean. In fact, in 2013 there have been fewer fires than in any of the last 10 years, and the year stands next to last in terms of acres burned.

Like the tornado season, so far the fire season has been well below normal. The Black Forest wildfire in Colorado and the recent deaths of 19 fire fighters in the Yarnell Hill, Arizona wildfire are examples of fires that stick out like a sore thumb in a below-normal wildfire season – just like the two late-May tornadoes which were exceptions to the trend of the overall tornado season.

It is my understanding that in both the Black Forest and Yarnell wildfires, areas burned that had not burned in the previous 40 years – which has to be a major factor contributing to the wildfire catastrophe. The media would say the fires are due to dry conditions, which definitely exist and in some cases are extreme. But if it had been a wet spring, then more fuel would have been available as the summers always see drier conditions in the southwest. The old saying, “Pay me now or pay me later” applies here: If it’s wet, the resulting new growth will eventually dry out and die. And if it’s dry and dead, it will eventually burn.

Worldwide, recent catastrophes seem to be focused largely on flooding-related events, with the notable events originating from the remnants of Tropical Cyclone Oswald that triggered severe flooding in Queensland and New South Wales in Australia. More recently, flood losses that impacted a large area along the Elbe river basin in Europe will likely surpass the 2002 European flood losses. In North America, heavy rainfall provoked catastrophic flooding in southern Alberta, Canada – which will likely go down as the largest flood-related loss ever experienced in Canada. However, with the 7th-latest start to the typhoon season, few typhoons have resulted in flooding or the kind of disasters typically seen in Asia. In fact, global Accumulated Cyclone Energy (ACE) is still stuck in the lowest range – which began in 2007 and is similar to the 1980s. Before Super Typhoon Soulik was upgraded on July 10 to a major 96+ knots tropical cyclone, the last major tropical cyclone, Sandra hit just east of Australia on March 11. And the clock is still ticking on the 2,811 days since the U.S. was last hit by a Cat3+ hurricane – the longest such period since 1900, if not before.

Overall it would appear there is a silver lining – because extreme weather events could be worse based on past years, plus you can’t control nature. Most often, catastrophic events like the wildfires, tornadoes and floods of 2013 can be tied to events of similar magnitude that occurred in the past. We are building bigger towns in locations where catastrophic events have occurred in the past, and the understanding of changes in population, income and housing units can often explain the increase in loss.

Severe Weather in a Warming World

Andy Siffert, BMS’ resident Meteorologist, discusses Severe Weather in a Warming World

As we have all seen in the media it would appear that on May 15 Mother Nature has turned on the severe convective storm season, which to date had been historically quiet in terms of insurance losses and severe convective storm reports.

Since May 15 the preliminary tornado count stands at 305 tornadoes, but considering the nation is currently at the climatological peak of the severe convective storm season and the tornadoes are occurring precisely where historically they should occur, the impacts of the severe weather should be expected and can be easily explained by understanding the current weather pattern.

The reason we have seen the recent uptick in severe weather activity to more normal levels is the spring of 2013 has been climatologically cooler than normal over the eastern two-thirds of the country, which has kept instability levels low. This is most likely due to a weather pattern associated with the a negative phase of the Arctic Oscillation (AO), which has kept a low amplitude jet stream pattern in place over the eastern portion of the U.S., allowing cool air from Canada to spill southwards into the U.S. blocking warm moist air northward progression from the Gulf of Mexico.

Starting in mid May a shift in the jet stream winds resulted in a weather pattern that allowed for frequent weather systems to draw upon the warm moist air from the Gulf of Mexico to clash with the cooler, drier air moving east off the Rocky Mountains. This different weather pattern has provided the main ingredients necessary to produce what have been widespread multi-day severe weather events.

Understanding weather patterns can fluctuate explains the last three years of tornado activity, which have experienced both a record minimum and record maximum tornado count. These two extremes of recent tornado surplus (2011) and the current tornado drought are rare and considering they are back to back it makes the occurrence even more unusual. However, these patterns have resulted in several contradictory views on the impact a warming world might have on severe convective storms in the U.S. In a warming world should we experience more seasons like 2011 or fewer tornadoes like 2012? Are extreme tornadoes like Moore, OK, a result of this warming world?

In the latest BMS Introspect – Severe Weather in a Warming World and Its Impact to the Insurance Industry we attempt to answer these questions.

Predictions for the 2013 Atlantic hurricane season

Andy Siffert, BMS’ resident Meteorologist, discusses the 2013 Atlantic hurricane season:


Forecast groups predict a very active 2013 Atlantic hurricane season.

The start of the hurricane season is three weeks away and eight independent forecast outlets unanimously agree it will be a busy Atlantic hurricane season with a few calling for a higher probability of a landfalling hurricane along the coastal USA.

It is reasonable to wonder whether these early hurricane forecasts are accurate. Last year, forecasters in April called for an average to quieter than normal season, and it turned out to be a busy year with 19 named storms, tied for the third most on record. Seasonal forecasters emphasize the difficulties in predicting hurricane activity in April and, in fact, it is most likely impossible, given current methods and technology, to precisely predict the named storm activity level in April. However, many forecasting groups say they have made progress in developing these predictions and there is improvement based on using climatology alone. We do know that skill does climb slowly as the hurricane season approaches, with moderate to good skill levels being achieved in early August.

Hurricane season begins June 1 and ends November 30 and in the linked, BMS Introspect – Atlantic Hurricane Outlook – April, we highlight the skill needed for an April hurricane forecast and what these forecasts are saying for the 2013 Atlantic hurricane season.

Julie Serakos, Head of Cat Analytics, Radio Broadcast

Head of Cat Analytics, Julie Serakos was featured in a Minnesota Public News Climate Cast broadcast focusing on the economic impact of climate change.

2012 was an expensive year for insurers. Global economic losses from natural and man-made disasters totaling $186 billion. Extreme weather events in the United States were the most expensive — Hurricane Sandy alone caused $70 billion worth of damage.

Julie was interviewed for the Climate Cast broadcast by Kerri Miller and MPR News’ Chief Meteorologist Paul Huttner, they utilised much of that interview in their discussion, while Julie’s recorded expert commentary featured in the first portion of the radio programme.

Click here to access the edited transcript of their conversation and to listen to the full broadcast.

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Mike Larson – Expert Column in Physician Insurer

BMS Group’ EVP of Analytical Services, Mike Larson details the latest trends in the medical professional liability sector, and offers some savvy commentary on what he’s observed.

Click here to read the full article.

Reprinted from the first Quarter 2013 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2013

Why was Sandy so unique?

Andrew J Siffert, Assistant Vice President & Meteorologist with the BMS Analytical Services Team discusses the implications of Hurricane Sandy.

Superstorm Sandy made landfall October 29th just south of Atlantic City, New Jersey. Despite land falling as a post-tropical system, it left in its path some impressive weather statistics. Its central pressure was the lowest ever recorded for an Atlantic named storm, north of North Carolina, breaking a record set by the devastating ‘Long Island Express’ hurricane of 1938. It is also the first storm in recorded history to landfall in New Jersey at a perpendicular angle to the coastline. Furthermore, Sandy resulted in record surge heights along many parts of the East Coast including a tide surge reading of 14.60′ at Bergen Point, NJ. Its massive wind field had a diameter of tropical storm-force winds at landfall of 945 miles and is one of the largest ever recorded. Given Sandy’s uniqueness it should be no surprise that the cat models used by the insurance industry to understand hurricane risk would most likely have very few stochastic events that would provide guidance to the expected loss potential and should be used with caution when analyzing this event.

Sandy’s uniqueness has also raised many questions of the damage impact from aspects of the event which are not modeled or not modeled well. The exceptional size of the wind footprint, the scale of storm surge, the large number of lengthy power outages, and the impact to major infrastructure, have added to the considerable amount of uncertainty surrounding the interpretation of insurance coverages, whether in relation to wind versus water, business interruption or windstorm deductibles.

Superstorm Sandy could easily place high on the list of the most costly hurricane losses for the insurance industry with insurance estimates ranging from $7 billion to over $20 billion and economic damage exceeding $50 billion. If Sandy causes $50 billion in economic damage (in 2012 dollars), it would rank as the 7th most damaging hurricane or tropical storm (out of 242) to hit the U.S. since 1900. The wake up factor is Sandy was far weaker than any other storm topping this list. Sandy was not even officially a hurricane when it made landfall along the U.S. coast. If Hurricane Irene in 2011, which impacted the Northeast as only a tropical storm, caused $4.3 billion in insured losses and didn’t raise questions as to how vulnerable the northeast coastline is, Superstorm Sandy will.

To learn more about BMS’ expert Analytical Services Team – click here.

BMS launches exclusive initiative to provide clients with innovative predictive modeling

BMS Group, the independent global broker, today announces that it has reached an agreement with leading US actuarial specialists Pinnacle Actuarial Resources, Inc. (Pinnacle) to provide predictive modeling to its clients.

Specialist predictive modeling has become an essential element in any leading-edge analytics tool kit and BMS has sought to ensure it can offer this innovative solution to its clients. Over the last 18 months BMS has significantly enhanced its Analytical Services division. Incorporating predictive modeling into its offering will allow BMS to give its clients a powerful range of tools to enhance their ability to assess and price risks, as well as improve claims and underwriting processes, leading to enhanced growth and profitability.

BMS’ Analytical Services team will work closely with Pinnacle, who will supply predictive modeling analyses and implementation support, as appropriate, to BMS clients. This joint venture is exclusive to BMS, as the only reinsurance intermediary Pinnacle is partnering with to offer its predictive modelling expertise to their primary company clients.

CEO, Carl Beardmore said:

We are proud to be able to make another industry-leading expert solution available to our clients. This exclusive relationship with Pinnacle will ensure our Analytical Services offering is one of the best in the business, providing clients with a tailored, cutting-edge package to meet their actuarial needs.”

Dave Spiegler, EVP and Chief Actuary, said:

BMS is committed to enhancing our analytical capabilities to offer our clients everything they expect and more. We look forward to working with experts of Pinnacle’s caliber, giving our clients the very best in predictive modeling services allowing them to better meet their growth and profitability goals. When BMS becomes your broker, our analytics team becomes part of your team and now Pinnacle will be part of that team too.”

Roosevelt Mosley, Principal and Consulting Actuary at Pinnacle, said:

We’re excited to be working with BMS to assist their clients in their predictive modeling needs. Whether it’s developing pricing models and rating relativities, evaluating new rating factors, analyzing underwriting processes, optimizing claim processes or developing claim fraud detection models, we’re ready to bring deep and extensive experience to BMS’s clients.”

PIAA Analysis – Unique Update Review

Dave Spiegler, EVP and Head Actuary at BMS, updates his unique analysis report on the profitability of the Physician Insurers Association of America (PIAA) companies and what it means for the MPL market.

Click here to read the full report.

Article – Analysis of PIAA members 2011 reported data

David Spiegler, Executive Vice President and Chief Actuary at BMS appears in the Physician Insurer Magazine, Second Quarter edition.

David talks about the findings of the BMS analysis of the 2011 data reported for the PIAA group of member companies.

Click here to read a PDF of the Article

“Reprinted from the Second Quarter 2012 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2012.”

Click here for more information on the BMS Analytical Services Team and Products.

A.M. Best 2012 Review & Preview Conference – P&C Highlights

Brett Bordelon, VP BMS Analytical Services, discusses the recent A.M. Best Review & Preview Conference and below is his summary report from the event.

A.M. Best 2012 Review & Preview Conference – P&C Highlights. This year, A.M. Best held its Review & Preview Conference on March 12-14 in Naples, FL. At the conference, A.M. Best and other insurance industry leaders provided their insights on the industry’s performance in 2011 and viewpoints on where the industry is heading in 2012. Senior A.M. Best analysts also gave presentations rich with insights on the rating process and rating methodologies.

Click on the link to read BMS’ P&C-focused recounting of many of the conference’s highlights.

Click here for our Analytical Services information page.