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Bust or Not? Seasonal Hurricane Forecasts for 2018

Predicting a hurricane season is risky business, and a few egos may have taken blows this past season. That is, at least until April when the majority of 2019 Atlantic Named Storm forecasts will be made and the 2018 Atlantic season becomes a distant memory.
Almost all hurricane predictions from spring (including mine) failed, as they called for normal to below normal Atlantic Named Storm activity. Even the early August forecasts, which account for a good chunk of the hurricane season, failed to deliver.

Most recent tropical cyclone forecasts from each of the forecasting centers. NCSU seems to be the only forecast shop that wins the hurricane numbers game for the 2018 season. Many others missed the total number of hurricanes that formed. Source: http://seasonalhurricanepredictions.bsc.es/

In total, there have been 15 Named Storms (30-year average is 12.1 Named Storms) – 8 hurricanes (6.4) and 2 major hurricanes (2.7). Accumulated Cyclone Energy (ACE) was about 124% of average seasonal activity. With four Named Storms resulting in nearly 10 billion dollars of insured loss so far, it was no doubt a costly season. When also considering the human toll along with too many broken meteorological records to mention, this season will be remembered for decades to come.

So what happened?
It appears that there are three leading reasons for this forecast bust, two residing in the oceans and one in the upper atmosphere.

If you recall, there was a lot of talk about how cold the sea surface temperatures (SST) were across the Atlantic Ocean, particularly in the Main Development Region (MDR), from April through July. A lot of the seasonal forecasts believed that these notably cooler than average ocean waters in the tropical Atlantic would be likely to persist into the heart of hurricane season and keep the Cape Verde named storm activity in check, resulting in lower named storm counts overall. Instead, Atlantic SSTs warmed suddenly back to near normal in August. While still nowhere near as favorable as conditions in 2017 or 2005, this warming gave just enough lift to peak-season African easterly waves like the one that spawned Florence.

I would say the next reason would be on the failure for El Niño to fully develop in the central Pacific Ocean. If a stronger El Niño had developed, it would have helped increase the vertical shear over the Gulf and Caribbean. However, the SST stayed in neutral territory before lurching suddenly towards El Niño in early fall, which was a few weeks too late to spare the Florida Panhandle the worst of Hurricane Michael’s fury as it strengthened right up until landfall.

Above are the SSTs from the beginning of June (Left) and end of August (Right). Highlighted in the boxes are the areas of SST anomaly over the Atlantic Ocean and the Pacific Ocean, which show the warming of SST in the Atlantic and the overall lack of SST change in the Pacific (warmer waters would favor El Niño).

Lastly, looking back at the BMS Tropical Outlooks that were issued this past spring, they really pushed the fact that the Madden-Julian Oscillation (MJO) would be the key to the season, and pulses of activity would be key to new Named Storm development. It seems that the final factor contributing to the poor forecasting season would have to be the bad luck the MJO played in the timing of the overall Atlantic basin pattern. One of these strong MJO pulses coincided with both the primary climatological peak of hurricane season in early September and the secondary historical peak in early and mid-October. These MJO pulses explain why the 2018 season felt so “lumpy,” with long quiet periods punctuated by dizzying, multi-storm bursts of activity.

As the peak of the Atlantic Hurricane Season neared, the MJO come to an active period as highlighted by the black circled areas.

Lessons Learned:

There are many lessons to learn from the 2018 Atlantic Hurricane Season. One that might tie in well with the forecast bust is that there can be incredible variability during a hurricane season, which is why there needs to be less focus on the seasonal forecast numbers and more focus on interseasonal forecast, which can capture variables like the MJO and help define where storms may track when the activity starts. These interseasonal forecasts are performing well on a three-week time frame and can provide the insurance industry with insight on whether the period will be busy or quiet.

Speaking of forecasting, this past season was a great example that even the best forecaster in the world can’t nail down hurricane intensity even in a short-term forecast. Hurricane Florence and Hurricane Michael showed hurricane intensity forecasting has a long way to come. Three days before Florence made landfall, it was forecasted to be a gigantic Category 3 hurricane but ended up being a large slow-moving Category 1. Michael was only a tropical depression three days before landfall, and at the time was only forecasted to be a weak Category 1 hurricane. That’s a long way from the storm that ensued, which was one of the strongest on record.

However, maybe all of this focus on the category of a storm should be another lesson to learn, as we experience time and time again that this focus can be too narrow. Insured impacts don’t revolve around the Saffir-Simpson Hurricane Wind Scale (SSHWS). As the name indicates, the familiar category scale is based only on a hurricane’s maximum wind speed, and thus sometimes fails to capture the true danger of large, slow-moving storms. When Florence dropped to Category 1 on its approach to North Carolina, some residents took the storm less seriously as a result, despite no decrease in flood risks. Alternatives to the SSHWS have been proposed, but in my opinion, all attempts to compress a hurricane down to a single number will have problems with oversimplification. Rather than discarding the venerable SSHWS, the answer could be as simple as expanding the role for overall hurricane threat and impact forecasts, which is the general purpose of the many BMS Tropical Updates provided before a storm makes landfall. The BMS Tropical Updates often try to break down the insured impacts of wind, surge, rain, and tornado risks that, with any hurricane, can range from minimal to extreme.

Another thing to remember and consider is that the forecast of a below normal or an above normal season doesn’t necessarily map to low or high chances of a hurricane landfall. With four named storms making landfall this past season, the insurance industry needs to keep its sights on the overall risk of named storm impacts. The catastrophe models are an important gauge to the overall risk during any given season. Seasonal hurricane prediction is an inexact science, and likely always will be. No matter what the numbers say for 2019, you need to look at the long-term risk and make slight risk management adjustments during the interseasonal forecast periods.

Resources:

Summary of 2018 Atlantic Tropical Cyclone Activity by Colorado State University

https://tropical.colostate.edu/media/sites/111/2018/11/2018-11.pdf

Hurricane Michael  Damage Assessment

http://windhazard.davidoprevatt.com/hurricane-micheal-10-oct-2018-preliminary-assessment-by-steer/10/2018/

Hurricane Florence Damage Assessment

http://windhazard.davidoprevatt.com/steer-early-access-recon-report-hurricane-florence/09/2018/

Good Tweet Thread on the  end of of the hurricane season by Michael Lowry

 

 

A Second Severe Weather Season

Severe weather outbreaks are synonymous with the spring season, but there is an ever-so-slight increase in activity in the fall as well. As the days grow shorter and the weather turns cold, the insurance industry needs to remain on guard, as this is the height of the second severe weather season.

Spring marks the shift from brutal cold to relentless heat, and the United States is often sharply divided between warm and humid weather in the south and cold and dry conditions to the north. The steep temperature gradient allows the jet stream to dip farther south, creating more opportunities for severe weather outbreaks to unfold.
As the country becomes uniformly and increasingly warmer in the summer, the relative lack of a temperature gradient usually pushes the jet stream far enough into Canada that it tends to only affect the northern part of the United States. This retreat of the jet stream allows the severe weather season to calm down – not completely, of course – but usually prevents the intense outbreaks of severe weather often experienced in April, May and June.

When fall rolls around and the country again starts to experience wild swings in temperature, the jet stream dips south once more and allows weather systems to develop and interact with the warmth and humidity. This results in spring-like severe weather outbreaks complete with a second spike in tornado activity, which is often accompanied by other types of severe weather.

Monthly U.S. Tornado Count from 2008 – 2017. Source: NOAA/NWS Storm Prediction Center (SPC) Storm Reports

The chart above shows monthly tornado reports between 2008 and 2017. To help illustrate this second season of severe weather, the overall monthly reports have been capped at a maximum value of 300. While total tornado activity varies widely from year to year, every spring produces a pronounced spike in tornado activity which is why we have capped the graph above at 300. This spring peak also provides the insurance industry with its primary season for severe weather loss. However, in each fall season between 2008 and 2017, highlighted in the red arrows, a clear secondary spike in tornado activity has occurred. While some of these fall twisters are a result of landfalling named tropical storms, most of the outbreaks are the consequence of the same processes we see during spring severe weather events.

Some of the fall tornadoes can be particularly strong. In 2013, several tornadoes impacted Illinois, including an EF-4 tornado that hit the small town of Washington. This round of severe weather caused almost $1B of loss to the insurance industry. This case was unusually rare as, typically, severe weather takes aim at the southeast, and the overall fall losses to the insurance industry are much smaller in total value.

Closing the Books on 2018 Severe Weather

Typically, by the end of October, 98% of the 10-year average annual insurance industry loss in the U.S. has developed. Similar to the trend in severe weather reports, there is a small, but noticeable, increase in secondary severe weather insured loss data for both the 10-year average annual loss and the number of events for the month of October.

The second season has been quite active this year, with several notable bursts of severe weather activity.

The most active tornado report day of 2018 (so far) was Halloween night, with 61 tornadoes occurring, breaking the previous record of 51 which occurred on April 13. Of course, an exceptionally quiet spring season likely helped to contribute to this unique scenario. What is also unusual is that, thus far, Property Claims Services has yet to issue a Catastrophe Bulletin for this outbreak from October 31 – November 2.

Below is a look at when severe weather associated with tornadoes happened this past year.

Here are the annual anomalies of 2018 tornado days to-date. Tornado alley, as it’s popularly defined geographically, is entirely below-average, but parts of Louisiana and most of the East Coast of the U.S. have been above-average.

Tornado Day Anomalies that correlate well with general severe weather days. Source: Sam Lillo Meteorology PhD student at Oklahoma University-

In fact, almost as many tornadoes have occurred this year in New England (19) as in Oklahoma (22), which adds to the noteworthy severe weather year that has transpired. Preliminary data suggests the state of Connecticut has had nine tornadoes this year – the most on record. The tiny state of Rhode Island has had one tornado, which tied for the most to have ever occurred during a calendar year. In Pennsylvania, 31 tornadoes were reported, which is the highest annual number in 20 years.

The U.S. is currently in a major tornado drought. There has never been a year since 1950 that has passed without an EF-4 or EF-5 tornado occurring, but this scenario is appearing likely this year as, currently, the U.S. is in its longest stretch without a violent EF-4 tornado and closing in on the longest stint without a destructive EF-5 tornado.

Summary:

This year’s severe weather looks to be completely average when compared to the last 10 years in terms of insured loss, barring any major severe weather outbreak over the remaining 48 days in 2018. After a quiet spring, tornado activity has been playing catch-up during an active second season, with severe storm reports of wind following the 2005 – 2015 average count. However, hail reports, which are not as common in the second season and over the winter months, will likely end up being well below the 2005 -2015 average report count.

With the impending El Niño for the winter of 2018 – 2019, one should expect an active storm track across the southern states with greater-than-normal severe weather across the Southeast including Florida. Although we are already potentially seeing this pattern of severe weather, not all El Niños are the same. As details emerge, more insight will be provided on what to expect for the winter and spring severe weather seasons across the Southeast states which could be more active than normal.

BMS makes senior energy hire

BMS Group Limited (“BMS”), the independent specialist insurance and reinsurance broker, today announces the hire of Duncan Hayward as a Director in its Energy division. Hayward, who joins in 2019, will lead the casualty initiative within the Energy division.

Hayward joins with 14 years’ experience in the insurance market, most recently serving as a Divisional Director at Price Forbes. Prior to that, he served as an associate at JLT, having begun his insurance career as an Oil and Gas Broker at Agnew Higgins Pickering.

Ian Gormley, Director, BMS Group, said:

“Our London Wholesale platform has gone from strength to strength in recent years, with market-beating growth. We place exceptional value in our people and work hard to attract the very best talent in the market. Our client-centric and flexible model of broking, combined with our employee-ownership structure, lies at the heart of our success. We are very pleased that it continues to draw the best and brightest individuals from across the market and I would therefore like to welcome Duncan to our team.”

BMS Wildfire Update Nov 9th

California’s typical wildfire season takes place in the fall, with the majority of large insured loss events occurring in October. Of the 27 large insured wildfire losses occurring in California since 1964, 16 have occurred in the months of October, November and December, and have accounted for 87% of the total losses over that time span. After an already long and destructive wildfire season for much of the western United States (which includes the Carr Fire and the Mendocino Fire Complex in California in July and August) that has resulted in over $1.3 billion of insured loss, major fires have again ignited in California on Thursday, November 8th. Much of the state is under an elevated fire risk, with almost 10,000 square miles under critical fire conditions according to the National Weather Service. Red flag warnings have also been issued, which represent conditions of very low humidity and high winds that tend to result in extreme fire behavior.

The cause of the Camp Fire has yet to be determined, but it started in the early hours of November 8 near the Plumas National Forest. The first firefighters to arrive found about 10-15 acres burning. Wind gusts of nearly 50 miles per hour helped accelerate its growth and spread it into the town of Paradise, CA.

BMS iVision has a direct feed of the current fire perimeters. These perimeters use the IRWIN (Integrated Reporting of Wildland-Fire Information) system. Perimeters are collected in the field by a variety of means, including infrared flights, and by using a GPS unit to map the perimeter. BMS clients can use these maps to see if any risks are exposed to the fires.

Initial reports suggest well over 2,000 residential and commercial structures have been destroyed by the fast moving fire which quickly spread embers into the center of town. The fire is currently encroaching on Chico, CA, and Highway 99 and several thousand other structures are still threatened by this fire. It should be noted that typically when fires burn over 1,000 structures, it’s safe to say that the insured loss will likely be above $1 billion.

List of the largest damaging wildfires in North America, ranked by # of structures destroyed. Note most fires with over 2,000 structures are often over $2 billion in insured loss. Fire Source: http://www.fire.ca.gov

Elsewhere across the state, the Hill and Woolsey fires ignited Thursday in southern California near the Thousand Oaks, CA community and began spreading rapidly. Evacuations have been issued this morning for the entire coastal community of Malibu, CA. Damage has been reported from the Hill fire, but the full magnitude is currently unknown. Just to the south, the Woolsey fire has jumped the 101 highway and has destroyed multiple structures according to Ventura County Fire Department. The Malibu area is under mandatory evacuation due to both of these fires, as authorities expect they could burn all the way to the coast and clearly there is major exposure in the current evacuation area.

In total, there are 13 known fires currently burning in California. With extreme fire conditions occurring, many of these fires will be difficult to contain and it is expected that several insured loss events could result from any of these fires. BMS iVision does have active wildfire layers, such as the current satellite derived hot spots and when issued, the integrated reporting of wildland fire information perimeters will be shown. Both of these resources allow the user to access the scenario based tools within iVision to understand the exposure and damage potential from these fires.

BMS expands in Australia with Senior Hires

BMS Group Limited (“BMS”), the independent specialist insurance and reinsurance broker, today announces that two senior leaders, Stuart Davies and Samantha Ford, have joined BMS Australia, effective immediately and reporting to BMS Australia CEO Andrew Godden.

Davies joins as a director with 25 years of industry experience in the UK and Australia, having most recently served as state manager for New South Wales at Gallagher. He has previously held senior roles at Aon and JLT, having begun his career as a sales executive at Hill House Hammond. At BMS, he will specialise in all aspects of corporate risks, including D&O and PI, as well as advising on placements across key emerging risk areas such as cyber, litigation risk (adverse costs), warranty and indemnity insurance and reputational risk.

Ford joins as a corporate broker with 15 years’ industry experience at Lloyd’s and in the Australian market. She began her career as an office administrator at Lloyd’s underwriting agency Booker International, before moving to Newline Group as syndicate administrator. She then moved to Marsh’s Australian division as an assistant account executive in 2006, before finally serving in a variety of senior roles at Gallagher’s Australian unit since 2008.

Andrew Godden said:

“At BMS we are always looking for the best and the brightest to join our team. We are a different kind of broker, client-centric, flexible and innovative. Our employee-ownership model means that our brokers are engaged and singularly focused on delivering market-beating client outcomes. Stuart and Samantha are fantastic additions to the team and will form part of our continuing strategic build-out in the region. I am therefore very pleased to welcome them to BMS Australia.”