When Hurricane Michael made landfall on October 11th 2018, it had a central pressure of 919mb, which is the third lowest pressure of any U.S. landfalling hurricane. Yet, at the time, the storm was classified on the Saffir Simpson Hurricane Scale as a Category 4 hurricane with winds of 155 mph – only one mph below the Category 5 criteria. On April 19, the National Hurricane Center (NHC) announced what some meteorologists were already thinking, that, at the time of landfall, Hurricane Michael was actually a Category 5 storm with a wind speed intensity of 160 mph. The NHC bumped up the maximum wind speed based on a detailed analysis of aircraft, Doppler radar velocities, and new surface wind speed observations. It is worth noting the caveat from the NHC report that the maximum winds were in a very small area and future revisions are possible. Reconstruction of Stepped Frequency Microwave Radiometer (SFMR) winds showed possible higher values, but the reliability is still unknown, and more research is being done on this data.

There is also some other useful information to the insurance industry in the NHC report. Along a wealth of observational data the report also details some important loss information. The National Centers for Environmental Information (NCEI) currently estimates total economic damages from Michael in the United States at $25B. There have been several media articles written about the continuing insurance loss development. With a current insurance industry loss at $10B, the overall figure is coming close to the generally-held rule that the economic loss is about half the insured loss for U.S. landfalling named storms. Another interesting aspect of the report is the overall damage figures. For example, $3B of loss was on Tyndall Air Force Base near the landfall location. The damage survey suggested that every building at the Base was damaged to some degree. In Mexico Beach, 1,584 out of the 1,692 buildings were damaged with 48% being completely destroyed. The report also goes into damage figure details for Bay County and Gulf County. For example, Marianna, Florida, which is over 50 miles inland, had 1,000 buildings destroyed or with major damage. Seminole County in the Southwest part of Georgia reported 99% of homes were damaged from wind gusts in excess of 100 mph.

Not to be overshadowed, the storm surge section of the report is just as impressive. The storm surge surveys and analysis revealed maximum inundation of 14.7 feet above what is normally dry ground in Mexico Beach, which would also explain much of the damage found in that area.

Top Four Historical Category 5 Hurricanes that have made U.S. Landfall. Plots created using NOAA Historical Hurricane Tracks Tool https://coast.noaa.gov/hurricanes/

The formality of upgrading Michael from a Category 4 to a Category 5 is a big deal. Michael is now tied with the San Felipe Hurricane of 1928 or also known as Okeechobee hurricane as the fourth strongest hurricane to strike the United States (including Puerto Rico) since 1900, behind the Labor Day Hurricane (1935), Camille (1969), and Andrew (1992).
If you believe empirical landfall probabilities, the addition of Michael in the U.S. record since 1900 has increased the probability of a Category 5 storm making landfall from 2.52% to 3.36% or, in terms of a return period, 40 years to 30 years. As respects Florida only, the same calculations went from 1.68% to 2.52% and 60 years to 40 years.

Constantly Changing View of Landfalling Hurricane Risk
So, has the overall risk for the insurance industry increased? How will this new data change the insurance industry’s view of landfalling frequency and severity?

Hurricane risk across the U.S. is understood through the use of catastrophe risk models that employ stochastic catalogs containing thousands of events, each one with a small impact on model results. There is an ongoing process of recalibration of the stochastic catalogs. This constant reevaluation of current and past storms contributes materially to the development of a rich stochastic set of events informed by the historical record that is adjusted based on history or future forecasts.

Due to advanced observation techniques and improved understanding of tropical cyclones, the Hurricane Research Division (HRD) has implemented a data set (HURDAT2) that addresses errors and biases identified in the historical record. A working group of scientists makes corrections to location and intensity information in the six-hour track points for select tropical cyclones. Additionally, this research, supported by new evidence and data, adds previously undocumented cyclones to the record. Currently, the scientists are looking at storms after 1960 with further changes likely as a result of new findings.

One does not need to look very hard for proof that catastrophe modeling companies use changes in HURDAT2 to help adjust landfall frequencies. Recently, HURDAT2 updated Hurricane King (1950) from a Category 2 to a Category 3 storm resulting in a long-term rate increase in Miami Dade County in one of the stochastic catalogs. Another notable example of a tropical cyclone reanalysis is the Labor Day Hurricane of 1935. Upon reanalysis, the maximum wind speed at the time of its first landfall over the Florida Keys was increased (23 mph), increasing its intensity to strong Category 5 status. This reanalysis revised the Labor Day Hurricane to be the strongest U.S. landfalling hurricane in the historical record. Additional reanalysis upgraded its second landfall, in northern Florida, from Category 1 to Category 2 intensity and shifted its track closer to land. This change also resulted in changes in loss results from the Florida region in particularly using this event as a historical what if scenario.

As Hurricane Michael continues to be examined by researchers, recent activity will also adjust landfall rates. In fact, the most recent updates of HURDAT2 reevaluated landfalling events during the 2015 – 2016 season, including Hurricane Hermine (2016) and Hurricane Matthew (2016), yielding localized loss increases in the landfall areas. Similarly, losses increased in Canada due to changes in landfall categories for some storms during the 1956 – 1960 period as part of the HURDAT2 updates. In areas that didn’t see any new landfalling storms, small decreases in loss across mainland U.S. resulted.

With the knowledge that Hurricane Michael is, in fact, the fourth Category 5 hurricane to make landfall along the U.S. coastline, it will surely change the historical view of risk, particularly in the Eastern Florida Panhandle, which already has a limited historical record of major hurricanes making landfall. Michael is now the strongest hurricane landfall of record in the Florida Panhandle and only the second known Category 5 landfall on the northern Gulf Coast. Additionally, Michael marks the latest in the season a Category 5 hurricane has made landfall in the United States. All of this should be factored into new landfall rate adjustments.

It is too early to determine potential changes to future stochastic catalogs, but these revisions tend to be in the single percentages based previous Atlantic Hurricane model updates. It should also be a reminder, however, that just because the landfall frequency and severity might change for major hurricanes, the insurance industry should not forget storms of lesser intensity can also cause billions of dollars in loss. Any hurricane can cause great devastation.