Active Severe Weather Season? Yawner Hurricane Season? – Think Again

After the long winter much of Eastern North America experienced, it is sad to say we are rapidly approaching mid-summer. This also means we are past the climatological peak of the U.S. severe weather season, and fast approaching the peak of the Atlantic hurricane season which occurs around September 10th. To many it may seem that the severe weather season has been an active one, while the hurricane season, to this point, has been a yawner. The data suggests, however, that the complete opposite has occurred.

U.S. Severe Weather Season

In terms of local storm report counts from the Storm Prediction Center, this year’s severe weather season has been below normal. The most noteworthy events are attributed to the above normal, and sometimes record breaking, precipitation in the Central Plains and Ohio River Valley which resulted in widespread flooding. In a normal severe storm season, defining events would be attributed to hail/wind/tornado events and not large precipitation events. According to one source, the number of flood losses, or more specifically sewer backup claims, are outpacing hail claims this season.

As many of us know, flood damage is often excluded under standard homeowners, renters, and business insurance policies. Due to this and the overall lack of severe weather, it is not surprising that insured losses to date are also below normal. In fact, PCS wind and thunderstorm insured losses are still falling below the 10 year average ($9.3 billion) by 53.5%. As of July 9th, $5 billion in insured losses have been reported with two outstanding wind and thunderstorm events. This season, we have yet to see a marque severe weather event causing over $1 Billion in insured loss. Comparing to previous storm seasons, one has to go back to 2005 to be this late into the severe weather season without experiencing a $1 Billion dollar insured loss event.

The severe weather outbreaks this season have been limited due to fluctuating weather patterns, resulting in below normal insured loss. A similar pattern, if it persists, should provide more episodes of severe weather, with less risk of tornadoes and a higher risk of high wind events (derechos) across northern states. This suggests that a marque severe weather event ($1 billion or larger insured loss) is unlikely as we finish out the season. Since 2001, only one marque event has occurred after July 10th which was the Phoenix hail storm in the Fall of 2010.

Atlantic Hurricane Season

Although North Atlantic hurricane activity has been quiet since Tropical Storm Bill (Texas landfall, June 16th), the development of named storms is a major weather concern for the insurance industry. This year, there has already been two named landfalling storms with Bill being the first PCS hurricane event since Sandy in 2012. To see a similar landfall activity before June 16th, one has to go back to 1871.

In terms of Accumulated Cyclone Energy (ACE) year to date, as of Monday July 6th , the basin was running 314% above normal. As we approach the peak of hurricane season, every day that passes without activity will decrease what started out to be a very above normal year statistically. As of July 10th, the North Atlantic ACE is already down to 157% above normal.

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Summary of the most recent 2015 North Atlantic season forecast

All forecasts continue to point to a below normal season with many negative factors weighing in on why named storms will have a difficult time developing in the Atlantic basin. Namely,

Insurance Industry Action Items

Long range seasonal forecasts still call for named storm development regardless of the negative factors listed above. In fact, some forecasts call for the expected development of named storms closer to the U.S. coastline, similar to areas impacted by Tropical Storm Bill and Ana. In an El Nino year, insured losses are typically lower than average; however, it only takes one significant event to impact the industry.

ENSO

 

The insurance industry should keep an eye on the Madden-Julian Oscillation (MJO), which is a large scale oscillation that propagates eastward across tropics of the globe. When an area of the tropics is under the influence of the MJO, it tends to enhance tropical activity. This year already, we have seen two strong MJO pulses partially trigger two different clusters of named storm development in the West and East Pacific. Carriers can track the MJO to get a better idea of when heighten activity could start to occur in the tropical Atlantic basin. The current MJO appears to be moving into the East Pacific region now, and if it sustains itself, could enhance tropical convection in the Atlantic basin toward the second half of July. This could allow the insurance market to take advantage of LiveCAT markets to protect specific programs.

The other area of concern for U.S. carriers could be Hawaii which has seen an unusual amount of hurricane activity over the past three years. Tropical Storm Flossie passed within 100 miles of the islands in 2013, and an unprecedented three hurricanes in one year passed within 200 miles of Hawaii in 2014. Statically speaking, named storms are about 3 times more likely to come within 100 miles of Hawaii in El Nino year versus in a La Nina year. Keep this in mind knowing that there is an El Nino strengthening in the Pacific.

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BMS appoints Gilles Bonvarlet as Non Executive Director

BMS Group Ltd. (“BMS”) today announces the appointment of Gilles Bonvarlet as Non Executive Director, subject to regulatory approvals. He joins the company’s board of directors led by recently appointed Chairman, John Hastings-Bass.

Mr. Bonvarlet has over 25 years of experience in the international (re)insurance markets. He joined Brockbank Group in 1994 and following the acquisition by XL Group became Managing Director of XL London Market Ltd. until 2004. He then joined Talbot Holdings Ltd as Chief Operating Officer until 2009.

Mr. Bonvarlet is currently a Non Executive Director of Amlin Underwriting Ltd. and Xchanging Insure Services, as well as the Chairman of One Re Ltd. He has also served as a Non Executive Member of the Lloyd’s Market Board.

BMS Group CEO, Nick Cook, said:

“It’s my great pleasure to welcome Gilles to BMS, his extensive knowledge of the insurance and reinsurance markets will be invaluable to our business. Gilles’ appointment demonstrates that we are determined to attract the market’s top talent as we continue to develop and strengthen our global footprint.”

Commenting on his appointment, Gilles Bonvarlet added:

“I am delighted to be joining BMS. The BMS brand is synonymous with high quality, independent and innovative brokerage, matched with technical expertise and an understanding of both the traditional and alternative capital markets. I look forward to playing my part in the company’s development as one of the world’s leading independent brokers.”

BMS appoints Erin Vaccaro as Vice President

BMS Intermediaries Inc. (“BMS”), the independent risk and advisory firm, today announces the appointment of Erin Vaccaro as Vice President of its Philadelphia based Property and Casualty Treaty reinsurance division, reporting to John Faustman, Executive Vice President.
Erin joins BMS from Guy Carpenter, where she served as Vice President. During her eight year tenure at Guy Carpenter, Erin worked in both the Philadelphia and London offices across global Property, Casualty, Workers Compensation and Personal Accident treaty accounts. She is a graduate of the Temple University, Fox School of Business and Management, with a Bachelor of Arts degree in Business Administration, majoring in both Finance and Risk Management and Insurance.

John Faustman, Executive Vice President of BMS, said:

“I’m very pleased to welcome Erin to BMS’ Philadelphia offices. She joins our existing team who are dedicated to providing clients with a highly responsive service and market leading technical expertise. This is an aptitude that Erin has demonstrated throughout her career and she will make an excellent addition to the team.”

Erin Vaccaro said:

“I’m very excited to be joining BMS, whose brand is synonymous with sustainable growth, outstanding customer service and innovation in the face of complex client requirements. I look forward to getting to know the team and being a part of the company’s leading Property and Casualty reinsurance account.”

BMS Intermediaries CEO Andrew Bustillo has highlighted the importance of reinvention for reinsurers as the market continues to evolve

BMS Intermediaries CEO Andrew Bustillo has highlighted the importance of reinvention for reinsurers as the market continues to evolve, in Insider Quarterly’s Walk the Talk profile. The article discusses the positive culture and collaborative approach of BMS Inc., BMS Group, Minova and Pioneer Underwriters. Growth in facilities, particularly for challenging risks such as cyber and terrorism are also a focal point.

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BMS Group CEO Nick Cook featured among a number of broker CEOs in the latest edition of Insurance Insider.

BMS Group CEO Nick Cook featured among a number of broker CEOs in the latest edition of Insurance Insider. ‘Lost Civilisations’ focuses on the challenges facing mid-tier brokers and how companies, including BMS Group are diversifying to remain competitive and continue to grow.

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