partner login

BMS News

2014 Atlantic Hurricane Forecasted Activity

The 2014 Atlantic hurricane season officially begins on June 1. A lot of preseason forecasts are hyping the importance a developing El Niño will have on the overall tropical activity in the Atlantic Basin, which should lead to less storm formation. However, a word of caution: there are plenty of examples of years with El Niños that had significant landfall activity across the U.S. Below is a list of the climate forcers that can influence named storm activity and how they will impact the 2014 season.

  • A weak to moderate El Niño is expected to develop, reducing named storm activity across the main development region in the Atlantic Basin.
  • A westerly to neutral Quasi-Biennial Oscillation will likely result in increased named storm development closer to the U.S. coastline, versus the development of Cape Verde-type storms.
  • Saharan dust can limit overall development of named storms, but conditions across North Africa are not favorable for large Saharan dust outbreaks and should not reduce named storm activity this year, but this climate forcer can change rapidly over the season.
  • Atlantic sea surface temperatures are warmer than the long-term average, but this temperature is slightly below-average relative to the current period of heightened sea surface temperatures that began in the mid-1990s. This will likely reduce activity in the main development region.
  • The sea surface temperatures are significantly above normal along the East Coast, which could increase development of named storms closer to the East Coast, increasing the threat of landfall.

The climate forcers above can provide an idea on the overall hurricane season activity, but, truthfully, there is little skill in predicting the total number of named storms and where they might make landfall. The best way for the insurance industry to prepare is to carefully consider the risks and their potential impact. BMS’ new weather risk management module in iVision can help carriers better understand their risk and manage portfolio accumulation in areas prone to hurricanes. iVision also has tools to track forecasted hurricanes, including detailed hurricane wind fields, which can help carriers understand the range of potential loss outcomes from landfalling hurricanes.  Learn more about the Hurricane Risk Management Module.

2014 Atlantic Hurricane Season and an El Niño

When the 2014 hurricane season officially starts on June 1, it will have been 3,142 days since the last Category 3 hurricane made landfall along the U.S coastline (Hurricane Wilma, 2005). This shatters the old record for the longest stretch between U.S. intense hurricanes since 1900. In fact, landfalls in general have been down since 2005, with a rate of 0.75 landfalls occurring per year since 2006, versus the rate of 1.78 that had been experienced since the warming of the Atlantic Multidecadal Oscillation in 1995.

Although Superstorm Sandy is still fresh in the minds of many insurers in the Northeast, insurers in hurricane-prone states could become complacent due to the lack of storms since 2005. The “doom and gloom” forecasts for the 2013 hurricane season failed to materialize, and early predictions for 2014 have already hinted at below-normal named storm activity, contributing to such complacency. These Atlantic hurricane forecasts call for hostile conditions across the deep tropics due to the development of an El Niño, which brings increased wind shear across the Main Development Region (MDR) of the Atlantic and could lead to less overall named storm formation.

There is a lot of chatter about the possible development of a “super El Niño” similar to that which occurred in 1997–1998. This type of event would drastically limit overall hurricane development. However, the Pacific Ocean is in an overall cold phase (the Pacific Decadal Oscillation (PDO)), a state which often makes it difficult to have strong, long-lived El Niño events. Instead, the PDO suggests a short-lived El Niño, but the specific manifestations of any given El Niño event greatly depend on its strength. Every El Niño event is different, but overall the phenomenon has become associated with the following:

* An uptick in the average global temperature

* Increased rainfall in Peru

* Drought in Australia

* Warmer than average temperatures in Alaska

* Elevated rainfall in California during moderate and strong events

* Dry weather in the Pacific Northwest states

* Increased snowfall in the Mid-Atlantic, especially for moderate El Niño events

* Cooler and wetter than average conditions in the Southeast U.S.

* Increased hurricane activity in the eastern tropical Pacific basin

* Depressed hurricane activity in the tropical Atlantic

While El Niño years generally have lower instances of named storms that make landfall, there are plenty of examples of El Niño-influenced hurricane seasons that have impacted the U.S. coast. Below is a look at such years, as well as the number of storms that made landfall and the adjusted insured loss in 2014 dollars.

Year # of Landfalling Storms Adjusted 2014 Insurance Loss
1957 2 $1,489,000,000
1965 2 $11,177,500,000
1969 1 (Camille) $8,250,000,000
1976 5 $300,000,000
1991 1 (Bob) $1,730,000,000
1992 1 (Andrew) $28,005,000,000
2002 6 $902,050,000
2004 6 $28,387,500,000

As we learned last year, seasonal forecasting has its challenges. Currently, there is a 75% chance of an El Niño developing this summer during the peak of the Atlantic hurricane season. However, in 2012 when an El Niño watch was issued, an El Niño never formed. In fact, since 1997 there have been five threats of a super El Niño that never developed. Therefore, taking into account the uncertainty in any seasonal climate forecast and the history as shown in the chart above, there can be an increased threat from tropical storms even in El Niño years. The 2014 seasonal forecast might also focus on other regional climate forces. One of these forces might be that the Sea Surface Temperatures (SST) off of the Eastern Seaboard of the U.S. are warmer than normal, which not only adds fuel to storms like Superstorm Sandy, but also could lead to deepening of pressures if any tropical disturbances tap into this potential fuel source later this summer. This warmer water also likely means that storms could develop closer to the U.S. coastline.

The new seasonal hurricane forecasts, which will roll out around June 1, tend to have increased accuracy as compared to the spring projections. These forecasts will continue to reflect the evolution of the El Niño, which can be followed on the Climate Prediction Center’s website (El Niño/La Niña Current Conditions and Expert Discussions). BMS will also provide updates throughout the season, but expect new seasonal forecasts to call for named storm formation to be below normal for the 2014 Atlantic hurricane season.

Peak of Thunderstorm Season Approaching

Although we are approaching the start of May, which is the peak month for thunderstorm development, the 2014 thunderstorm season has been off to a historically slow start. One advantage to this inactivity is that the insurance industry benefits from low thunderstorm losses not seen since 2004. In fact, the insurance industry has reported only $780 million of wind and thunderstorm event losses over three events (with two events yet to be estimated), according to Property Claims Service (PCS). This is far below the $4.6 billion in wind and thunderstorm event losses that have occurred on average over the last 10 years.

Not including the tornadoes that have occurred over the last few days as designated in PCS Event #40, the Storm Prediction Center has recorded 109 tornadoes as of April 24 for the 2014 calendar year which, according to BMS’ in-house tornado database from the Storm Prediction Center, indicates that this year is the slowest start to a tornado season in the 62 years of recorded data. Although the recent outbreak of tornadoes will add to the tornado count, the official count will still be in record-low territory. Harold Brooks at the National Severe Storms Laboratory, who has examined nearly 100 years of past tornado records, states that he is “challenged” to find a year that started with less tornado activity than 2014. Of the nearly 100 tornadoes reported this year, only 20 of them had been rated EF1 or higher, with the first EF3 or higher rated tornadoes only recently being recorded with this latest outbreak. This breaks a streak of 159 days, which currently stands as the fourth-longest streak on record between major tornadoes.

Despite the massive tornado that carved a swath of damage across Moore, OK during the 2013 tornado season, overall tornado statistics show that the U.S. has been in a tornado drought since the second half of 2012, with a record low number of tornadoes in 2013. Part of the explanation for the drought in intense tornadoes that has occurred since October 2013 is the persistent dip in the jet stream over the eastern half of the nation. This has unlocked the floodgates for arctic air, essentially shutting down the instability that is needed to develop explosive thunderstorms, which are often fueled by heat and moisture from the Gulf of Mexico.

The long-term forecast suggests much of the same cold will continue across the North Central Plains into the East Coast through the start of May, which should aid in putting a lid on thunderstorm development. But an extremely quiet start to the tornado season guarantees nothing about its future course, since May and June, which average 116 and 60 tornadoes, respectively (based on records from 2003 – 2013 of EF1-rated tornadoes or greater), are usually the two busiest tornado months of the year in the U.S. Despite the historically slow start, when looking at the tornado data recorded since 1953, 37 of the 62 years, or 59%, have started with below-average tornado counts of EF1 or greater. Of the 37 years that started below average, 6 years, or 16%, ended up having an above-average tornado season, The most recent years with slow starts but above-average tornado activity are 2010 and 2004, which resulted in $12.7 billion and $3.5 billion, respectively, in wind and thunderstorm event losses, according to PCS. As we saw with the recent PCS #40 declaration, there will be tornado outbreaks that cause billions of dollars in damages, but a major year like 2011 or 2008 could almost be ruled out and this recent trend should make one rethink the claims of the “new normal” back in 2011.

 

BMS launches Severe Weather Analytics

BMS Group announces a new weather risk management module as part of its iVision™ suite of analytical tools and services.
The unique new analytical tools allow carriers to better understand their risk and manage portfolio accumulations in areas prone to tornadoes, hail, straight-line winds and hurricanes.
The new module introduces expanded weather analytics features that make it even easier for insurers to manage severe storm risk. These features include:

  • Live weather feeds from NOAA
  • Daily severe storm shape files featuring AER Respond weather data, highlighting tornado paths, active hail areas, hail size and density
  • Active and forecasted hurricane tracks including detailed hurricane wind-field shapes
  • Historical PCS event library with one-of-a-kind PCS cat event shape files, available exclusively from BMS

“iVision’s new analytical tools augment traditional cat modeling results by enabling users to modify and alter damage ratio and track assumptions for tangible, definable events, which allows them to arrive at a view of loss they can have confidence in,” says Julie Serakos, head of BMS’ Cat Analytics group.
These new weather analytics features facilitate the understanding of the loss potential in a portfolio (thereby stress-testing its vulnerability to loss) by allowing for custom damage ratios to be applied against storm attributes. Additionally, testing portfolio sensitivity to the hurricane track increases confidence in the range of potential loss outcomes for landfalling events.

About iVision
BMS’ iVision is an easy-to-use catastrophe risk management system carriers can access online. Built on the latest GIS technologies, it helps today’s insurance companies increase efficiency and effectiveness in managing their catastrophic risk. iVision’s other analytical features include BMS’ proprietary ScenarioView™ for DIY event analysis, and RiskReveal™ location cat modeling (featuring AIR and RMS cat models) for underwriting. These features let carriers manage large loss exposures and ensure adequate premium before a policy is bound.

BMS enters into exclusive partnership with RTI International, one of the world’s leading research institutes

BMS Group recently entered into an exclusive partnership with RTI International, one of the world’s leading research institutes, to offer clients award-winning Enterprise Risk Management (ERM) services that have a proven track record in managing complex business operations.

The concept of ERM is nothing new. For decades, organizations have been using a variety of methods and processes to intelligently weigh and manage risks against opportunities. ERM provides a framework for this risk management – which typically involves identifying particular events or circumstances relevant to an organization’s objectives, assessing them in terms of likelihood and magnitude of impact, determining a response strategy and monitoring progress. By identifying and proactively addressing risks and opportunities, businesses protect their interests and create value for stakeholders.

But, as highlighted by Solvency II in Europe and ORSA in the U.S., in recent years ERM has evolved in response to the needs of an increasingly sophisticated global marketplace, with more varied and complex businesses and stakeholders who want to understand the broader spectrum of risks so they can be managed effectively. No longer limited to owners, customers and employees, these stakeholders have come to include regulators and rating agencies, which have also increased their scrutiny of risk management processes.

What does all this mean? ERM, which used to be considered a global business trend, has become a recognized best practice. And that’s where the BMS/RTI relationship comes into play.

Close collaboration between BMS brokers and our analytical and technical professionals lets us give clients a superior level of analysis, modeling and strategic guidance,” says David Spiegler, Executive Vice President and Chief Actuary at BMS. “That talent, combined with sophisticated analytical tools, methods, and award-winning risk management processes as provided by RTI, means that we are able to take a truly holistic look at a client’s risk, which is what businesses need today.”

The strength of a business and its reputation is based in large part on management’s ability to properly identify, assess and manage risks. A properly implemented ERM program will help deliver a better-performing organization by allowing us to identify and address risks before they become problems,” says Ward Sax, Vice President, Treasurer and Chief Risk Officer at RTI. “Our applied research in ERM has resulted in award-winning best practices we can share with clients.”

“ERM absolutely includes the capital modeling and analytics, but that’s just one part of the equation,” says Kurt Johnson, EVP of Analytical Services at BMS. He explains that beyond making sure a building and computers are safe, true ERM is about smart business planning and breaking down silos within an organization. “There’s a huge element of common sense to ERM, and we can help demystify it for clients,” Johnson adds. “You can’t eliminate chaos, but you can plan for it.”

 

Click here to visit the BMS Analytical Services ERM page

 

 

About RTI:

RTI International is one of the world’s leading research institutes, dedicated to improving the human condition by turning knowledge into practice. Our staff of more than 3,700 provides research and technical services to governments and businesses in more than 75 countries in the areas of health and pharmaceuticals, education and training, surveys and statistics, advanced technology, international development, economic and social policy, energy and the environment, and laboratory testing and chemical analysis. For more information, visit rti.org.

 

 

Philippines Review, Reactions Magazine – Andy Siffert

Andy Siffert, BMS’ resident Meteorologist, featured in Reactions Magazine online discussing the challenges the Philippines faces in it fragile recovery from the devastation caused by Super Typhoon Haiyan.

Click here to read the article (registration required).

 

Inside Medical Liability Magazine – Dave Spiegler

BMS’ Chief Actuary Dave Spielger featured in PIAA’s Inside Medical Liability, 4th Quarter edition, discussing the MPL Sector.

Click here to read the article.

Reprinted from the fourth Quarter 2013 issue of Inside Medical Liability, Physician Insurers Association of America. Copyright, 2013.

Click here to access the article online

Click here to read all about the BMS Analytical Services offering.

 

Hurricane Wilma’s 8th Anniversary

As we approach the end of the 2013 Atlantic hurricane season and take in the media attention around the anniversary of Superstorm Sandy, it is also important to mark the 8th anniversary of Hurricane Wilma’s landfall, which occurred October 24, 2005. This was the last major hurricane to make landfall on the U.S. coastline. It has now been 2,938 days without a major landfalling hurricane – remarkable given the changes scientists said might result from warmer sea-surface temperatures in the Atlantic Ocean. The U.S. landfalling hurricane event data set is one of the best meteorological records that exist in the U.S. In looking at the historical landfall record, the longest period without a major landfalling hurricane stands at 3,316 days (August 11, 1860 – September 8, 1869). If a major hurricane doesn’t make landfall in the U.S. next year, we will surpass the longest period without one.

Unless we are in some very unusual climate state that has not been discovered, there is a growing disconnect between overall Atlantic Basin activity and landfalling named storms. While the average overall Basin numbers are higher than normal since 2006, with every passing year since then the U.S. has seen only 19 named storms make landfall, and only six hurricanes – with no major hurricanes making landfall. This translates to a landfall rate of 0.75.

Using the landfall data from 1900, in a given year the expected landfall rate of a hurricane impacting the U.S. coastline is 1.5, with a 77% probability of at least one hurricane impacting the U.S. coastline. For major hurricanes the rate is 0.5 with a 40% probability – so the U.S. landfall rate is significantly below average.

Given this landfalling hurricane drought, the United States coastline has been lucky. Although insurance companies have been suffering losses of other types over it, the average annual hurricane loss during this drought has been just $4.9 billion, according to Property Claims Services. This is below the long-term average annual loss of $6.4 billion as calculated using the insured historical loss data from Dr. Pielke Jr., a database that attempts to normalize hurricane damages in the United States. Accounting for Superstorm Sandy in 2012, which was not a hurricane at landfall, this average annual loss since 2006 would increase to $7.7 billion.

With a below normal landfall rate of only 0.75 hurricanes since 2006, in the future the trend for more landfalls should correct back closer to the long-term rate if we assume that hurricane landfalls follow a poisson distribution and we are not in some unknown climate regime. After all, the probability of not having a major hurricane make landfall over a 9-year period is a very low 1%, meaning insurance companies should expect an increase in losses from hurricanes in the future. Something to ponder as we await next year’s forecast.

It’s a risky world

Over the last few weeks Travelers and Swiss Re released polls suggesting people perceive that the world is becoming a riskier place and many are under-insured.

The main driver for public opinion is that this is a perceived period of “more extreme weather”. Although many mention that it is a riskier world, many people don’t seem to be doing much about it. Generally, preparation for extreme events is poor and there often seems to be an overreaction or under-reaction of preparation to such events. This contrast highlights the subjective nature of individual risk perception.

It seems only urgent alarms of an impending “Frankenstorm” really inspire proactive preparation, sending people shopping for batteries and bottled water. All too often people assume that their flashlights, sandbags and backup generators will protect them from the fierceness of Mother Nature. Therefore, the more control over a risk you think you have, the less worried you might feel – no matter how false that sense of control might be.

We often view these risks in terms of probabilities, but many people are bad at understanding probabilities. It’s a good bet that most people who experienced a “once in a century” storm feel that such freakish weather is not likely to happen in the next few years or decades. Sorry, but Mother Nature does not work that way. There are probabilistic patterns for assessing the risk of natural disasters over the long-term. Managing risk is a real trick as the risks over the long-term are much larger than our very brief lifetimes have witnessed or can remember.

Our short memories often refer to past historical weather patterns that tend to get replaced by what we remember seeing more recently. As a meteorologist, I am not the only one guilty of consistently watching The Weather Channel when a major weather event is occurring. Some people would say many of us have become addicted and can’t stop watching television and scanning news sites and social media, far more than we actually require to stay informed.

That brings us to the transmitters of storm news – the media, both news and social. News coverage is far more likely to warn us that the sky is falling than to reassure us that it isn’t. “If it scares, it airs”, because anything that threatens us is more likely to grab our attention. If weather forecasts include days of Frankenstorm predictions, the future is going to feel frightening. To be fair, despite their breathless alarm-ism, the news media did make the public aware of Sandy, helping us prepare. The aftermath of Sandy demonstrated why we should worry.

Risk perception determines how prepared we are — or aren’t. It determines whether we follow government evacuation orders or make sure we have candles, working flashlights, and bottled water. When it comes to flood insurance, risk perception determines whether we buy insurance and polls suggest most people are confident that their home or dwelling are properly insured. However, flood insurance take-up rates are ridiculously low, suggesting the perception of flood risk is that flooding is not a high risk, yet time and time again high uninsured flood losses occur. Opinions of “it won’t happen to me” or “I’ve been through these storms before, it won’t happen again” do persist.

 

 

 

Tropical Update: Approaching the Peak of the Hurricane Season

Historically, September 10 is the peak of the North Atlantic hurricane season, which typically sees 10 or 11 named tropical storms. This climatology number climatology number is usually represents the last 30 or 50 years, but the average since 1995 is higher – at 15 named storms, 8 hurricanes and 4 major hurricanes – and corresponds to the so-called active era in the North Atlantic, caused by warm Atlantic Multidecadal Oscillation. With the storm Erin just being named in the eastern Atlantic Main Development Region (MDR), the storm total for this year (through the second week of August) sits at 5. This is about two weeks ahead of climatology, which suggests the fifth named storm is often observed around August 31. The first hurricane is climatology-observed on August 10, so unless the current activity develops into a hurricane, the Accumulated Cyclone Energy will continue to fall behind the climatological norm.

In August, Sea Surface Temperatures (SST) in the MDR extending from the Lesser Antilles to the Cape Verdes Islands warm significantly, which is one reason why three storms have formed in the MDR so far this year. It’s also part of the reason seasonal forecasts are calling for a more active than normal hurricane season.

Figure 1 shows the SST in the MDR. Image Credit: www.weatherbell.com

SSTs are solidly 27°C off the African coast and rise slowly to 28°-29° as tropical waves approach the Caribbean islands.  But lately the main issue is the presence of Saharan dust in the MDR.

Figure 2 is a look at the graphics from the NASA GEOS-5 model, which shows the dust that continues to occur over the MDR. Image Credit: www.weatherbell.com

I am not quite sure what is considered to be normal in terms of dust occurrence. But as a proxy in lieu of actual dust measurements over the MDR, we can look at the at the 400-mb- specific humidity over the last dozen years to demonstrate how dry the MDR has been (Figure 3). This dry, dusty air is not conducive to tropical development and has been the main reason why Chantal, Dorian, and most likely Erin have stayed below hurricane status and could result in less overall named storm active compared to what has been forecasted.

Figure 3 is the 400 mb Specific Humidity since June 1, 2013 over the MDR. Image Credit: NOAA / Earth System Research Laboratory

Over the past week many media outlets have been hyping the upcoming few weeks of the hurricane season.  This is because the strong, opposing wind shear has weakened across the MDR. Furthermore, the dry, Saharan air off the African coast has begun to dissipate, compared to earlier this season. Thus, conditions in the Atlantic are quickly becoming more favorable  for hurricane development, which should come as no surprise since about 80% of the season’s hurricane activity is produced in mid- to late August and  September.

Updated Seasonal Impact Forecast:

A high impact for the U.S. is still expected, but the newest weather pattern forecasted for the next month suggests a shift centered at a corridor near Florida rather than in eastern Florida and up the east coast. The European Center for Medium Range Weather Forecasting (ECMWF) model September forecast appears to be much wetter in the Caribbean and eastern Gulf, which supports the idea of seeing storms track in that area at this time of year.

Florida, which just had its wettest July on record (with 12.38 inches of rainfall – 4.91 inches above average), is an example of the large amount of moisture that has been observed along the east coast this hurricane season.  Because wet soil can increase basement leakage and tree fall, these wet soil conditions should lead to increased losses if the area is impacted by a named storm.