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BMS Tropical Update 8/31/2016 12 PM CDT

Update:  12:55 CDT   has officially been upgraded to Tropical Storm .  Because of Aircraft observation from hurricane hunter.  Not because of satellite, ship, or drone observations. 

Tropical Depression (TD) #9
The insurance industry needs to continue to focus on Tropical Depression (TD) #9 which has been trolling the industry for 14 days. It refuses to take the next step to become named storm “Hermine.” If I had a dollar for every time a model suggested a named storm would develop in the next 12 hours, I would be a wealth meteorologist.

This leads me to the next point: the National Hurricane Center (NHC) classification for storms that approach the U.S. coastline have become increasingly technical in recent years. It is bothersome because it has an impact on the insurance industry. Sandy is a recent example of how technical the NHC storm classification has become. Sandy was downgraded from a hurricane to a post-tropical cyclone less than 100 miles from the New Jersey coastline. With TD #9, countless observations many have suggested that TD #9 should have been a tropical storm. In fact, a ship just recently observed winds of 35 kts.

Even the NOAA Global Hawk Drone aircraft that spent 24 hours observing the storm found tropical storm winds.

This bothers me because back in early 1900’s, storms were classified based on simpler information, such as ship observations. There were no drone aircraft or various other heavily scientific equipped aircraft flying into storms to examine the exact center of circulation. The historical catalogs that are used to create today’s catastrophe models have always used ship reports and flooding rain reports from newspapers to suggest a named storm was likely in the area. This was how storms were classified before all this great technology that allowed the NHC to become so technical. This additional technical information skews modern-day historical catalogs from how it would have otherwise been classified, and it could influence catastrophe models understanding of future named storm risks.

However, storm category is less relevant to the insurance industry at this point in time. The industry needs to focus in on impacts, regardless of what category is ultimately assigned to the system in the Gulf. Which is another lesson learned from Sandy, even a non-hurricane can have hurricane impacts. TD #9 will likely have impacts similar to hurricanes as it tracks northeast over the next several days and makes landfall Thursday night somewhere north of Tampa in the Big Bend region of Florida.

09L_tracks_latest09L_intensity_latest

 

Florida Threats
The main threat at this time is heavy rainfall and flooding. Many parts of Florida will continue to experience heavy rain with a 3” – 13” swath of rain predicted across much of northwestern Florida. Flooding is expected in inland areas and coastal areas as well, as the Big Bend region of the coastline is prone to storm surge. The NHC now issues very detailed storm surge forecasts with every advisory.

Adv12_Surge

 

Depending on the strength of TD #9 at landfall, winds may gust strongly enough to cause tree damage and power outages. An absence of recent hurricanes made the area ripe for tree falls. Soil moisture is already above normal for the projected landfall area, and even a weak gust of wind can down unhealthy or overgrown trees. A good natural cleaning of foliage can be expected.

Lastly, along with any tropical system there is always a risk of isolated tornadoes. The northern and central parts of Florida and far southern parts of Georgia are at risk as the center of the system moves across Florida later this week.

BMS clients can preview many of these hazards by using iVision to better understand their exposure to the upcoming event.

Post-Landfall Florida
Some models suggest that after the system makes landfall in Florida, it could hang around off the East Coast and maybe even make a second landfall in the Northeast later next week. But before we examine the storm’s next move, we need it to move to the Northeast from its current stationary location.

BMS Tropical Update 8/29/2016 12 PM CDT

The next three weeks are traditionally the peak of the Northern Hemisphere tropical cyclone season. Mother Nature surely knows as there are now eight tropical systems to watch across the Northern Hemisphere:
• Five are being monitored for landfall over the next five days.
• Four threaten the U.S. coastline.
• Two have been classified as Hurricanes Madeline and Lester, and both are in the East Pacific tracking westward towards Hawaii. Madeline will closely approach the Big Island of Hawaii on Wednesday night, and if the track holds, Lester is forecasted to move past the Big Island on Saturday.
Tropical Depression (TD) #8 is located 210 miles east the Outer Banks of North Carolina and will make close approach to Cape Hatteras, all before turning back out to sea tomorrow night. At this time, no insured loss is expected with this system as tropical-storm force winds are expected to remain just offshore.
TD #9 is our old friend Invest 99L that, after much fanfare last week, took 11 days to develop into a tropical depression. This system still needs to be watched closely as it has the highest potential to impact the insurance industry. Although the upper air conditions (Strong Wind Shear) are not ideal for hurricane development, the sea surface temperatures are very warm off the west coast of Florida. TD #9 should be a named storm later today.
As a result of a cold front that will provide cooler weather over much of the East Coast for the long Labor Day weekend, this will also allow the system to turn to the northeast and lead to a track that will cross northern Florida with landfall in the Great Bend region on Thursday. Thereafter, the track calls for the system to accelerate out to sea off the coast of the south-eastern U.S. TD #9 is expected to continue slight strengthening as it curves northeast in the eastern Gulf of Mexico in the next 36-48 hours. It should be noted that this system has a history during which multiple models over-forecasted storm intensification. Now, based on the current intensity ratings issued by many of the forecast models, the NHC seems to have opted for a more conservative forecast. Below are the current NHC’s chances of winds reaching tropical-storm force in the next 5 days, which are 30% or less at individual locations in Florida.

TS_WindProb_Aug29Aug2912PM_99LForecastedIntesnity

 

The biggest impacts to the insurance industry would be tropical storm force winds, which could include minor damage and tree fall damage. Rainfall is expected to be 3” – 6” across much of Florida over the next five days so localized flooding is possible.

Lastly invest 92L  is coming off of Africa and has a 40 – 50% chance of development over next 10 days and is expected to track toward the U.S. coastline similar to invest 99L over the last 11 days.  Let’s hope the drama around invest 99L last week does not lead the insurance industry to disregard the next threat as we approach the peak of the season September 10th.

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BMS Tropical Update 8/25/2016 12 PM CDT

In the past six days the insurance industry has waited and watched for tropical wave Invest 99L to develop into a named storm. Frankly, it’s getting tiresome.

Six days ago at this time many models predicted Invest 99L would become a full named hurricane.

99L_GFSAug19th

Above is the 00z run of the GFS model on August 19th valid for this coming Monday, August 29th, which had Invest 99L at a category 5 hurricane as it safely re-curves away from the East Coast.
It is all but certain this scenario will not play out, and once again, it reemphasizes the point that there can be large model errors that exists in hurricane forecasting. In fact, this reminds me of my February presentation at the Reinsurance Association of America Cat Modeling conference on HypOcane. This presentation examined the large forecasting errors associated with Erika and Joaquine in 2015. These errors led to unnecessary hype due to the over-reliance on numerical models. We can’t forget that forecasting tropical systems it not an exact science. The track errors are improving for named storm forecasting, but intensity forecasting still remains a challenge. Invest 99L highlights these challenges as some models suggested six days ago that there would be a tropical system nearing the Bahamas; however, the intensity guidance was all over the place as shown in the scenario above.

99L_ECMWF_Guidance

Last 9 ECMWF track forecasts for Invest 99L. The two Gulf coast landfalls were 8-day forecasts and were highly uncertain. This option is still on the table.

 

99L_GFS_Guidance

Last 26 GFS track forecasts for Invest 99L. All but two focused on Florida. The last few model runs of the GFS model have hard time tracking Invest 99L.

NOAA hurricane hunters continue to find a poorly organized tropical wave southeast of the Turks and Caicos Islands. There are times where tropical-storm force winds have been observed, but a lack of a well defined center of circulation with convection continues which is needed for named storm status. This could change at any time.
So for now, it is the same old story: there is a chance of a storm developing, and conditions west of the storm are ripe for development due to very warm sea surface temperatures, less dry air aloft and lower wind shear environment.

What we know today about Invest 99L:
• Models slow the forward speed of 99L late this weekend into early next week. This lessens the chance that the system will move into the western Gulf of Mexico, and increase the chances the system will move into eastern Gulf of Mexico.
• If a named storm develops, Louisiana/Mississippi/Alabama landfall cannot be ruled out, but models suggest Florida is at peak risk.  Time is however running out as the system tracks closer to Florida.
• Most models provided poor intensity guidance. If the system is ultimately named, hurricane development can not be ruled out due to the warm sea surface environment in the forecasted path of the system.

For the latest track and forecast information please visit:

http://www.tropicaltidbits.com/storminfo/#99L

BMS Tropical Update 8/23/2016 12 PM CDT

It’s time for U.S. insurers to take careful note of tropical wave 99L that I blogged about on Friday. This tropical wave is currently 400 miles to the east-southeast of the Leeward Islands. At its current translation speed of 15-20 mph, the wave will reach the eastern Caribbean tomorrow morning and Puerto Rico on Thursday. A hurricane hunter is slated to investigate 99L this morning, and the data it collects could suggest a high likelihood that the tropical wave will develop into a named storm: the name “Hermine” awaits. This hurricane hunter data will also provide improved data for numerical weather models and will augment future track forecasts.

Aug2312PM_AtlanticImage
Future Possible Track
Climatology suggests Invest 99L is at least six days away from any U.S. interaction, so a great deal of uncertainty still exists within the forecast. However, based on its current location, climatology suggests with 32% probability that a named storm will impact the U.S. and with 27% probability that a named storm will make U.S. landfall.
When you factor in forecast-model suggestions, these probabilities increase: model consensus indicates that Invest 99L will track toward the Northern Caribbean islands. Some divergence starts to occur at this point within the models: Some of the models take the system into south Florida and some take the system into the Bahamas. But either scenario increases the probability that the system will track toward the U.S. over the next few days.

Aug2312PM_99LForecastedTracks

 

Despite forecast uncertainty, many scenarios have potential to play out in the next six days. One historical marker looms large. On this date in 2005, Tropical Depression 12 formed in the Bahamas and was forecasted to track toward Florida as a tropical storm. A few days later, Tropical Depression 12 developed into Katrina and hit south Florida. It was the last August hurricane to make landfall in Florida. We now know Katrina quickly gained strength in the Gulf of Mexico to become one of the most devastating hurricanes in U.S. history. It should also be noted 24 years go today hurricane Andrew made landfall in south Florida after rapidly strengthening near the Bahamas.  Just as was experienced with  hurricane JOAQUIN storms can rapidly strengthen in this general area given the very warm sea surface temperatures.

01_AL1205W

TD 12 forecast on this date in 2005. TD 12 went on to be hurricane Katrina.

Katrina, Andrew, Joaquin serve as a reminder that hurricanes can develop rapidly in the right conditions and forecast tracks have uncertainty five to six days out. In the more than 10 years since Katrina, weather models have improved, and they suggest tropical troubles could be brewing closer to the U.S. later this weekend. These 11 years since Katrina have also brought new and untested insurance companies and 2 million additional Florida residents, many of whom have never experienced a hurricane. All of these facts add up to the conclusion that Invest 99L requires careful watch over the next several days.

Other Systems:

Fiona – continues to weaken south of Bermuda and is no longer being watched by the National Hurricane Center.  It maybe come back to life so stay tuned, but stay out to sea.

Gaston – should become a hurricane later today and track into the central Atlantic and east of Bermuda early next week.

Tropical Trouble In The Long Range Forecast

Tropical Storm Fiona
A few weeks ago I mentioned the approaching peak of the Atlantic hurricane season (September 10). Peak season means that tropical waves will move off the African coast, and attention will focus on the main development region of the Atlantic Ocean. Peak season also means that every tropical wave will need to be watched, and various media may highlight long-range forecasts of major hurricanes tracking toward the U.S. coastline. However, conditions off the African coast are still not ideal for development due to near-normal sea surface temperatures and an abundance of dry dusty air in the upper parts of the atmosphere (known as the Saharan Air Layer or the “SAL”).

This week the sixth named storm (Fiona) of the Atlantic hurricane season formed from a fairly strong African wave. However, as it tracks slowly west, Fiona is fighting high wind shear and the SAL, and as a result, it continues to be a weak tropical storm located about 1,295 miles west of the Cape Verde Islands. Fiona should continue to track to the northwest over the weekend and will likely stall early next week as a weak tropical depression near Bermuda – if it even makes it that far. So at this time, Fiona does not appear to threaten the insurance industry.

Invest 99L
Unlike Fiona, Invest 99L may be the bigger threat to the insurance industry. Invest 99L is an area of disturbed weather currently labeled by the National Hurricane Center (NHC), and to understand Invest 99L, a football analogy may help. Fiona functions as a lead blocker. She sealed off the SAL, allowing Invest 99L to go wide left into more fertile territory later this weekend: as described in my earlier posts, as tropical systems move closer to the U.S., they are likely to develop and strengthen. Likewise, Invest 99L may intensify as it tracks westward to this more fertile territory.

8192016DryAirSAL
Invest 99 is worth mentioning because the NHC currently indicated a 50% chance that it will develop into named storm Gaston. They project this system will track into the Leeward Islands over the next five days, and as this storm tracks west, it will encounter increasingly warm sea surface temperatures.

 

Invest99L8192016
Invest 99L is currently favored by models to develop and strengthen in the coming days. However, as stated, this is also the season when the media tend to highlight a single model run as a doom-and-gloom scenario.

Often this far in advance, these forecasts don’t verify, and all forecast scenarios need to be considered at this time. There are a multitude of scenarios still in the playbook for Invest 99L after all it’s not even a named storm yet.
Below is a look at the U.S. Global Forecast Model (GFS) ensemble model output. In total, this is a model run with 21 different forecasts to create an ensemble. The current forecast run demonstrates the uncertainty in the forecast in terms of track.

99L8192016_GFSEns

Below is a summary of various forecast model intensity guidance as Invest 99L tracks westward over the next five days.

99L_intensity_latest

In summary, Invest 99L has a high chance of developing into tropical storm Gaston over the weekend. There is some uncertainty in its long-range forecast track, but we know with high confidence that the system is expected to track toward the western Caribbean where the water is warm enough to support healthy hurricane development. If atmospheric conditions are ideal next week, a potential hurricane could approach insurable risk in the Caribbean and U.S. If these conditions late next week are not ideal, the current tropical wave could be just that – a tropical wave.

Peak of 2016 Atlantic Hurricane Season Is Approaching

It’s hard to believe, but the Atlantic hurricane season began 189 days ago when Hurricane Alex formed on January 13 and went on to become the strongest hurricane ever to form in the month of January in Atlantic Basin. The early season continued with three landfalling named storms that formed this June, making it easy to assume that an early season means an active season. But an early start to the season does not necessarily mean that the heart of the hurricane season will be active. A current lull in the basin since June 21 and long-range forecasts suggest there is limited opportunity for development for the reminder of July. However, climatology suggests we are not out of the woods yet. Instead, we are only just approaching September 10: the peak of the season when storm formation becomes much more frequent.

This is the time of year when eyes are trained on the massive cloud clusters that move off the West African coastline. These clusters have been limited so far this season. The only movement off this region is massive plumes of Saharan dust.

splitEW

Current CIMSS Tropical Cyclone Team imagery that is useful for monitoring the position and movement of dry air masses such as the Saharan Air Layer (SAL) and mid-latitude dry air intrusions. Animations of the imagery are useful for tracking these features and can also help identify the source of the dry and/or dusty air that is indicated in the imagery.

In some cases, these dust plumes have traveled all the way to the Texas Gulf Coast. Known as the Saharan Air Layer (SAL), this dry, dusty air has about half the moisture of the typical tropical atmosphere and can discourage the clouds and tropical convection needed for named storm development. Although we still lack a full understanding of how the SAL affects tropical systems, there are likely several reasons why it limits cloud and tropical convection development, and thereby limits the likelihood of named storm development.

  • Dry air can enhance downdrafts (sinking air), suppressing convection around the system.
    As tropical waves move off Africa, any resulting convection quickly reaches the bottom of the SAL (typically at altitudes between 5,000 and 15,000 feet); then entrains dry air which limits further convection.
850mbPlotTempAnoms

Here is the current 850 mb temperature normalized anomalies which shows that areas of heavy dust have warmed the atmosphere at this level 3 – 5 degrees Fahrenheit.

  • Typically atmosphere cools with height, but the SAL absorbs sunlight, which retains warmth and creates an inversion for thousands of miles across the Atlantic basin. This essentially caps the development of the showers and thunderstorms that are needed in tropical cyclone development.
  • Dusty conditions can be enhanced by stronger easterly winds that increase wind shear and tilt or outright displace the convection aloft from low-level circulation, thus limiting convection and tropical cyclone development.
  • The SAL shields sea surfaces from the sun and can keep the sea surface temperatures cooler than normal across the main development region.

Data suggests decadal variability in the SALs that may impact tropical activity (unfortunately, since the insurance industry doesn’t need another multi-year decadal pattern that could influence tropical cyclone development). Records going back to the 1960s and 1970s that were collected by satellites and island stations (using dust as a tracer) show that SAL activity have ebbed and flowed over the years. In the 1980s, some studies point to quiet periods that coincided with a stretch of increased dust outbreaks. In the 1990’s, dust activity decreased and tropical cyclone activity began ramping up.
At this time it is difficult to say if the dry, dusty air will continue into the heart of the Atlantic Hurricane season which effectively peaks around September 10th. We are only one-third of our way through hurricane season, and June and July are not usually good indicators of what is to come: on average, those months account for only 4% of Atlantic major hurricane activity.

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— Philip Klotzbach (@philklotzbach) July 20, 2016

And just as a reminder, the 2004 named storm season didn’t have its first named storm form until August 1, but 2004 ultimately became one of the most active seasons on record for U.S. Florida landfalls.

The insurance industry shouldn’t let its guard down. If the dust persists and Cape Verde storms are hampered by the SAL, storms may instead develop in the western Atlantic which provides a higher likelihood of making U.S. landfall. And given the Western Caribbean and Gulf of Mexico is experiencing record warm surface temperatures and heat content, there is plenty of energy for these storms to become powerful hurricanes should they track over such warm waters.

tchp-2005-2016

Total oceanic heat content (called the Tropical Cyclone Heat Potential, or TCHP) in kilojoules per square centimeter (kJ/cm^2), for July 15 for the years 2005 – 2016. TCHP was at near-record or record values over much of the Caribbean, Gulf of Mexico, and waters surrounding the Bahamas in July 2016. TCHP in excess of 90 kJ/cm^2 (orange colors) is commonly associated with rapid intensification of hurricanes. Image credit: NOAA/AOML.

In summary, El Niño is gone and La Niña conditions are slowly building in the Central Pacific, and the SAL is currently hampering development in the main development region of the Atlantic. Long range forecast models remain quiet with little development chances. However, the warm ocean heat content and sea surface temperatures near the U.S. coastline would provide plenty of fuel for a strong hurricane if one were to track over these waters.

Already off to a head start – Hurricane season officially begins June 1

After two years of below normal named storm activity in the Atlantic basin most prognostication suggests that the 2016 Atlantic hurricane season will be above average. Many of these forecasts are citing a weakening El Niño and warmer than average seas surface temperatures over much of the Atlantic basin as a reason to expect conditions would slightly favor more named storm activity.

So far the prediction of an active season seems to be holding, with named storm Alex forming in January and most recently tropical storm Bonnie making landfall in South Carolina this past Memorial Day weekend. In fact, 2016 now joins the year 2012 as the only years, since reliable satellite coverage began; to have two named storms form prior to June 1.

Season

Univ. of Miami – Calendar of activity during the Atlantic Hurricane Season

Historically, the average number of named storms to develop in a season is 12, with six reaching hurricane status and three becoming major hurricanes. This year the overall number of named storms will likely be higher due to the lack of El Niño that tends to dampen hurricane formation in the Atlantic by increasing wind shear. In an environment with high wind shear, weak tropical disturbances have a more difficult time reaching into the atmosphere and forming into named storms. A La Niña looks to be rapidly developing and historically this climate forcer has lead to an above normal Atlantic hurricane season, which increase the chances of U.S. landfall named storm activity.

Wildcards

Like most hurricane seasons there are a few wild cards that could factor into more or less storm activity on top of general El Niño/ La Niña influences. One of these factors would be the Atlantic Multidecadal Oscillation (AMO) which has two phases: —a high hurricane activity phase and a low hurricane activity phase. Given the decrease of hurricane activity over the past few years, forecasters are uncertain as to whether the high-activity phase, which began in 1995, has ended. If it has, we could continue to see fewer hurricanes despite the otherwise favorable conditions of La Niña and warm ocean water.

Atlantic mutidecadal oscillation from 1950 to 2015

Atlantic mutidecadal oscillation from 1950 to 2015

Another wildcard could be the Saharan Air Layer (SAL) which is a mass of very dry, dusty air which forms over the Sahara Desert during the late spring, summer, and early fall and usually moves out over the tropical North Atlantic Ocean every 3-5 days. The SAL can have a significant negative impact on tropical cyclone intensity and formation. Its dry air can act to weaken a tropical cyclone by promoting downdrafts around the storm, while its associated strong winds can substantially increase the vertical wind shear in and around the storm environment also making it difficult for storm formation. The SAL can cover an area the size of the continental U.S. and has been tracked as far west as the Caribbean Sea, Central America, and the Gulf of Mexico.

Current position and movement of dry air masses (SAL) (Orange / Red mean dry air)

Lack of Named storm Landfall forecasts

Many of the seasonal outlooks don’t predict how many storms could make landfall, but there has been a dearth of major hurricane landfalls over nearly the past decade, and even more so the lack of any hurricane landfall of any intensity in Florida since Wilma in 2005. In that time, more than 2.5 million people have moved to Florida who might have no experience preparing for or responding to a landfalling hurricane.

To get an idea of possible landfall areas for this up-coming Atlantic hurricane season some seasonal forecasts use current atmospheric and global sea surface temperature patterns to put together analogs years of past storm tracks. These analog years (1988, 1995, 1998, 2007, 2010, 2012) provide ideas of where storms have tracked when past condition were similar to this years conditions. This year it would appear there will be more named storm activity forming closer the U.S. coastline vs storms forming in the middle of the Atlantic Ocean in the main development region. This would yield a higher chance of named storm / hurricane landfall. The analog years point toward more storm activity in the Western Caribbean Sea which could increase the chances of a storm tracking into the Gulf of Mexico as well.

All

Storm track maps of the current analog years

 

In summary NOAA’s outlook is in line with those from other organizations, both academic and private. Last month, Colorado State University research scientist Phil Klotzblach issued an outlook for a nearly-average season. Britain’s Met Office predicts a slightly above average season, as does private weather companies like WeatherBELL Analytics and WSI. The London-based weather consortium Tropical Storm Risk is forecasting a season 40 percent more active than the past 10 years, with 17 named storms, nine hurricanes and four major hurricanes. On the lower side would be the algorithm derived by University of Colorado Boulder which suggests only 6-12 named storms this season.

Travelers Indemnity v. Portal Healthcare Solutions

The US Court of Appeals for the Fourth Circuit rendered an unpublished opinion on the above referenced action pursuant to cross-motions for summary judgment filed by the parties in US District Court for the Eastern District of Virginia.  The dispute arose over whether Travelers had a duty to defend Portal against class-action allegations that Portal posted confidential medical records on the internet.  The US District Court concluded that Travelers did have a duty to defend Portal against the underlying class action and the US Court of Appeals affirmed.  Keep in mind that an insurer’s duty to defend is generally construed more broadly than its duty to indemnify.

The district court included the following paragraph in the background section related to the language found in the 2012 and 2013 policies issued by Travelers:

The 2012 and 2013 Policies obligate Travelers to pay sums Portal becomes legally obligated to pay as damages because of injury arising from (1) the “electronic publication of material that … gives unreasonable publicity to a person’s private life” (the language found in the 2012 Policy) or (2) the “electronic publication of material that … discloses information about a person’s private life” (the language found in the 2013 Policy). (See doc. 1, at 5-6)

Personal and advertising injury liability coverage is offered under Coverage B in the CG 00 01 04 13 CGL policy form published by ISO.  The insuring agreement for Coverage B covers sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies.  The insuring agreement also covers defense of the insured against any “suit” seeking those damages.  “Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses:  …e.  Oral or written publication, in any manner, that violates a person’s right of privacy.  In the Travelers case, the district court concluded (and the appeals court affirmed) that making confidential medical records publicly assessable via an internet search does fall within the plain meaning of “publication”, even if the publication was unintentional.  The court also determined that posting confidential medical records online without security restriction gives “unreasonable publicity” to, and “disclosure” of information about, patients’ private lives.

I believe one could argue that, given similar circumstances to those in the Travelers case, there is at least the potential for coverage under the ISO CGL form sufficient to give rise to a duty to defend on the part of the insurer.

Turning to the issue of limits, the most common limits we see on a standard CGL policy are $1,000,000 with a general aggregate limit of $2,000,000.  In the ISO CG 00 01 04 13, Section III – LIMITS OF INSURANCE, Part 1. states:

1.  The limits of Insurance shown in the Declarations and the rules below fix the
most we will pay regardless of the number of:

a.  Insureds;
b.  Claims made or “suits” brought; or
c.  Persons or organizations making claims or bringing “suits”.

2.  The General Aggregate Limit is the most we will pay for the sum of:

a.  Medical expenses under Coverage C;
b.  Damages under Coverage A, except damages because of “bodily injury” or
“property damage” included in the “products-completed operations
hazard”, and
c.  Damages under Coverage B.

The following subpart also applies to the “personal and advertising” limit;

4.  Subject to Paragraph 2. above, the Personal and Advertising Injury Limit is the most we will pay under Coverage B for the sum of all damages because of all “personal and advertising injury” sustained by any one person or organization.

My reading of the above policy language from the ISO CGL policy, and supported by expert commentary from IRMI – How the Limits Apply in the CGL, the Personal and Advertising limit applies separately to each person or organization that sustains damages because of a covered offense or offenses. Consequently, in an action by multiple plaintiffs arising out of the same offense, multiple Personal and Advertising limits could be exposed but limited by the general aggregate limit under each policy period. Once the aggregate limit under the policy is exhausted, no further claims be made against the policy term as set forth in Part 2 above, with the exception of products-completed operations losses.

One of the key findings in this case is that “publication”, for purposes of qualifying for coverage under personal and advertising injury coverage in a CGL, does not have to be intentional nor would it have to be actually accessed by an outside party. This raises the possibility for coverage for “personal and advertising injury” for accident publications of information which violates a person’s right to privacy.

ISO has developed several coverage endorsements which provide more flexibility in how insurers choose to address cyber exposure, including an optional endorsement which deletes the invasion of privacy-related offense from the definition of personal and advertising injury applicable to Coverage B under the ISO CGL Coverage Form. A summary of some of these options can be found in an article published by Insurance Journal – ISO Comments on CGL Endorsements for Data Breach Liability Exclusion.

Urban Friesz works as a Vice President and Senior Claims Specialist in our Minneapolis, MN location. He can be reached by phone at 952-229-8856 or by email at urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.

 

Fading El Niño – What’s Next For Insurance Industry?

A Q1 and El Niño wrap up

With winter and Q1, 2016, behind us, the insurance industry can review the active weather pattern and resulting insured losses. As mentioned in my blog post last fall, Florida experienced lots of weather activity, which is typical during strong El Niño winters such as this past one.  However, overall insured losses, while not historic, haven’t been benign either: Q1 losses ran about 31% above the 10-year average insured loss according to my estimates with Texas and the Southern Gulf states taking the brunt of the insured losses.  Although the remarkable blizzard (January 22–24) resulted in limited insured impacts based on the Property Claim Services (PCS) initial estimate, winter storms increased losses in the West.  In fact, the PCS issued four separate bulletins for the state of California more than any other year during the last 10 winter seasons.  Examples like this highlight the relatively predictable impacts of an El Niño winter.

After virtually tying the record for the strongest El Niño (as defined by a three-month running mean sea-surface temperature anomaly in the so-called Niño 3.4 region of the central and eastern equatorial Pacific Ocean), sea-surface temperatures (SST) are steadily cooling. NOAA’s March El Niño outlook suggests this El Niño may be all but gone by late spring or early summer.  In fact, some climate models and a recent government outlook suggest a shift to its opposite, La Niña by this fall.  As a result, the insurance industry needs to consider the potential for higher losses which are often associated with the La Niña phenomenon.

March_ENSO_Anomaly_SubSurface

Looking below the surface in the ocean waters in the Central Pacific, you can also see a trend of colder-than-average water working its way eastward across the International Date Line, eating away at the warmer-than-average equatorial Pacific water from below – another sign of a weakening El Niño.  Source: CPC

The unpredictable El Niño-La Niña relationship

Scatterplot showing the relationship in El Niño / La Niña states from one year to the next, for every year since 1950 in which an El Niño occurred. Each dot represents a pair of “year 1 vs. year 2” El Niño / La Niña states. In general, the stronger the El Niño (higher values on the x-axis), the stronger the subsequent La Niña (lower values on the y-axis). For more details and a larger version of the graphic, see the associated ENSO Blog post

Scatterplot showing the relationship in El Niño / La Niña states from one year to the next, for every year since 1950 in which an El Niño occurred. Each dot represents a pair of “year 1 vs. year 2” El Niño / La Niña states. In general, the stronger the El Niño (higher values on the x-axis), the stronger the subsequent La Niña (lower values on the y-axis). For more details and a larger version of the graphic, see the associated ENSO Blog post

El Niño and La Niña events each typically last for only 9-12 months, and they typically recur every 2-7 years, according to Columbia University’s International Research Institute for Climate and Society.  Flip-flops from a strong El Niño to La Niña are not unusual. For example, the record-setting El Niño of 1997-98 was almost immediately followed by La Niña the following summer, reaching moderate-to-strong intensity before finally ending in Spring, 2001. A similar pattern followed the strong El Niño of 1972-73.  However, neutral conditions followed three other strong El Niño’s that occurred in 1982-83, 1965-66 and 1957-58.

What Does It All Mean for the Insurance Industry?

Expect higher losses! If La Niña develops, 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.  However, there are some broad trends that have shown up in past weakening El Niño events that could give a hint on what to expect in 2016.

Severe Weather Season

Various climate forcers such as North American snowpack, Pacific Decadal Oscillation and Gulf of Mexico SST can influence North American severe weather, muddling the impacts that El Niño or La Niña might have. Disregarding these factors and only looking at past weakening El Niño events that transitioned to La Niña, the data suggests weather will vary based on location. A moderate-to-strong La Niña tends to promote severe weather across the Southeast (conversely, El Niño promotes severe weather in Florida, the high plains of Texas, and up through Colorado to Minnesota).

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. La Niña years seem to favor stronger storms over the Southeast (Dixi Alley). This area is densely populated, which may lead to more claims of severe weather.  But like with any weather peril, even a quiet year can have an EF-5 roll into a city and cause devastation.  In the end, insured losses are largely based on good luck or bad luck.  Example: if the Joplin tornado of 2011 had shifted a few miles south during that La Niña year, no one would talk about it today.

This severe weather season the key could be the summer heat expected in the central Plains and Great Lakes could mix with the wet spring expected in Texas and Louisiana and increase instability leading to storms in the Northern Plains and Ohio River Valley.

Atlantic Hurricane Season 2016

Much hype accompanied last hurricane season due to El Niño’s tendency to produce stronger wind shear, which tends to tear apart developing or mature tropical cyclones and result in less tropical development. Sure enough, June through October, 2015, Caribbean wind shear was the highest on record since 1979, according to Dr. Phil Klotzbach, tropical scientist at Colorado State University (CSU). The team at CSU has also in the past pointed out that the timing makes a big difference:  If a transition to La Niña happens late in the year, it’s less likely to influence the Atlantic hurricane season.  The forecast team at CSU will issue their first outlook for the 2016 Atlantic season on April 14.

However, the CSU team and other leading researches have pointed out that U.S. hurricane impact rises dramatically in a La Niña or neutral season compared to an El Niño season. On an annualized 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.

Hist_ENSO_Impacts

General stats of past La Niña and El Niño Atlantic hurricane seasons and the number of landfalls with adjusted historical total insured losses when accounting for all hurricane and tropical storm impacts for those years.

With El Niño potentially vanishing by the start of the 2016 hurricane season, the chance increases for tropical cyclones surviving to make U.S. landfall. If El Niño was the only factor, that is. I expect the team at CSU to discuss El Niño / La Niña, but also discuss the possible switch to a cool mode of the Atlantic Multidecadal Oscillation (AMO), which might suggest less storm activity in the next decade. This is because the far North Atlantic has been quite cold for about three years, and the SST pattern continues to cool (evolving as it did in the early 1960’s [the last time the AMO switched from a warm phase to cool phase with SST cooling in the North Atlantic and a slow progression of colder anomalies propagating into the tropical Atlantic and with warmer anomalies hanging on closer to the U.S. coastline).

The odds may shift a bit toward a more active Atlantic hurricane season in 2016, but El Niño’s absence doesn’t guarantee that outcome. Since the 2006 season, there have been some very active seasons with very few landfalling hurricanes, and the insurance industry still awaits that major hurricane landfall.

Summary:

El Niño, La Niña, or the lack of either (known as the neutral phase), is only one large-scale forcing on the atmosphere. Its presence or absence does not definitely determine severe weather or hurricane.  Climate models indicate a La Niña will follow the recent powerful El Niño, and we can look at past weather patterns to speculate future impact on particular insurance portfolios.  Right now the best analog years would be 1988, 1995, 1998, 2007, and 2010 during those years PCS losses averaged 10.6B, but what is more important is using those years to understand where the severe weather and hurricanes occurred to get an ideas of what might occur this year.  For example: U.S. landfalling hurricanes were limited, but in almost all those year the western Caribbean and Gulf of Mexico experienced some named storm activity.

2016_AnalogYears_v2

Historical hurricane tracks of the 1988, 1995, 1998, 2007, and 2010 hurricane seasons  Source: NOAA Historical Hurricane Tracks

Climate forcers like El Niño and La Niña can help predict the frequency of overall extreme weather activity, but truthfully, long-term predictions about the number of named storms, location of landfall or the power of other severe weather is impossible. The best way for the insurance industry to prepare is to carefully consider the risks and their potential impact. BMS’ weather risk management module in iVision can help carriers better understand their risk and manage portfolio accumulation in areas prone to hurricanes and severe weather. iVision also has tools to track forecasted hurricanes, including detailed hurricane wind fields. It has several severe variables around severe weather which can be combined with hurricane layers to provide a holistic view of an event and help carriers understand the range of potential loss outcomes from extreme weather events.  Learn more about the Hurricane Risk Management Module and Severe Storm Risk Management Module.

First East Coast winter storm of the season

If you have been living under a rock the last few days, you might not know that the first big nor’easter of the 2015/2016 winter season is expected to hit the East Coast of the U.S. this weekend. This storm summary will focus on the insured impacts of and provide a historical context for this intensely forecasted event. However, it should be noted that much uncertainty accompanies the forecasts, so predicted impacts could change as the storm develops over the next two days.

The media hyp-o-meter around this storm is at an all-time high due to the fact that there is good agreement among all the various models we use that a big nor’easter is going to happen, and some of its impacts will be major or even record breaking.

 

Collapse from weight of snow
The biggest question that everyone wants answered is how much snow is going to fall. No one can accurately answer that question today, unfortunately. What we do know is that a number of factors will contribute to a high-moisture storm. In other words, there will be a lot of snow. It’s just not possible at this point to say where the most of the snow will fall – but plenty of forecasters are trying! I highly suggest following the local National Weather Services office for the most accurate snowfall forecasts.

NWS human-made snowfall grids look great ... continuous like a global model. Totals thru Sat 7 PM

NWS human-made snowfall grids look great … continuous like a global forecast model.  Totals thru Sat 7 PM. Source WeatherBell Ryan Maue

So far, the storm has slowly trended south on the weather models. Additionally, it has a very sharp temperature moisture gradient on the north side. Due to the uncertainties on the northern fringe of this storm, there’s going to be a razor thin margin between major snow and conversational snow. However, due to the lack of existing snow pack, collapse due to weight of snow at this point in the season is unlikely to cause insured losses to buildings with standard structural integrity.
Of course the first significant snowfall of the year also means drivers must adapt to slippery conditions which will result in accidents and higher auto related losses. Finally, the snow, ice and wind from this storm could also cause prolonged power outage which could results in insured losses.

 

Wind and flood risks
Despite the fact that most of the media coverage is focused on snowfall, potentially destructive wind and coastal flooding often go unreported. This storm is big and slow, and due to the tight pressure gradient, as the storm strengthens off the east coast, it will allow for a strong on-shore flow, which could cause damaging wind gusts and storm surge along the coast. Winds and flooding could cause serious issues for the insurance industry. Depending on its ultimate track, this storm has the potential to become one of the top 5-10 coastal flooding events for folks from the Jersey Shore into Virginia.

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A National Weather Service storm surge model forecasts water levels more than 5 feet above normal in parts of New Jersey and New York, rivaling some of the biggest coastal floods in history.

To illustrate the threat posed by this storm, consider that an 8.5 foot tide level would rank in the top 8 tide levels of all time at Cape May, New Jersey. As illustrated by the chart below, the Extratropical water Level Guidance from the National Weather Service, highlights the wind/flood risk associated with storm surge guidance for various cities along the coast. For Cape May, NJ, you’ll see the highest tide cycle for this storm ends up at a water level of about 8.5-8.7 feet.

CapeMayNJSurge

For historical comparison in the same location, consider that Sandy produced a tide level of 8.9 feet, an October, 2011, storm produced a tide level of 8.7 feet, and a December, 1992, storm produced a tide level of 8.6 feet.

NE_StormSurgeChart

Forecast as of 01/21/2016 9:20: EST (units in feet MLLW)

Insured property along the coast or back bays of New Jersey, Delmarva, and Virginia, are likely to be the most impacted as the storm has the possibility of lasting 2-3 high tide cycles. If the storm track shifts a bit or the intensity changes, we could see these values change. It’s a fluid but serious forecast for the insurance industry: the coast is where the highest winds will hit, and those winds may gust as high as those of a tropical storm. Speaking of winds, expect severe storms to produce wind damage and possibly an isolated tornado across the state of Florida.

 

Insured Loss Analogs
Historically, the East Coast is no stranger to large nor’easters. In fact, last year’s large snow event and winter time insured losses should be fresh in the insurance industry’s mind given the record breaking snowfall over New England and one of the costliest winters ever for the industry.
On average over a 56-year period, 1.3 nor’easter occur every year, and 2.3 large snow storm events occur as defined by the Northeast Snowfall Impact Scale (NESIS). In the last ten years, these non-inflation adjusted event level losses have averaged out to cost just over $300M per event.
The table below provides a few analog storms that resemble the forecast guidance for the current storm. Right now, the model guidance does not suggest a repeat of the first Superstorm / “Storm of the Century” (March 12 – 15th of 1993) which still stands as the costliest nor’easter to impact the insurance industry.
NE_SnowStormEventLossChart

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Source: http://www.eas.slu.edu/CIPS/ANALOG/analog.php