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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.

2015HUforecast

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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Magnitude 6.0 Is Not The Big One

A magnitude 6.0 earthquake is big, but not “The Big One.” This blog looks at some interesting aspects of the recent California earthquake, as well as general issues the insurance industry should consider as we await “The Big One.”

The strongest earthquake to strike San Francisco’s Bay Area in 25 years was recorded on Sunday morning. The U.S. Geological Survey (“USGS”) registered a magnitude 6.0 tremor at 3:20 a.m. local time, with an epicenter located 5 miles south/southwest of Napa, California at a depth of 6.6 miles.

The insurance industry is just starting to grasp the complex nature of the Napa earthquake losses, but it is important to note that this might be the first earthquake in California to utilize some of the newest geospatial technologies, allowing companies to immediately understand the risks exposed and produce damage estimates based on the magnitude of shake intensity.

USGS ShakeMap within BMS iVision

Despite the shaking, damage, injuries, and fear, thankfully this earthquake wasn’t “The Big One.” But, the South Napa earthquake provides a good example of how magnitude is important when analyzing an earthquake’s impact to the insurance industry. Earthquake magnitudes are on a logarithmic scale. Each integer number increase in magnitude reflects 10 times more ground motion and 32 times more energy released. While it sounds like a magnitude 6.0 and a magnitude 6.9 are close enough to get lumped into the same category of earthquakes, the impacts of each are dramatically different. For example, the Loma Prieta earthquake (M6.9) of 1989 was more than 22 times stronger than Sunday’s magnitude 6.0 event, illustrated below in a comparison of two ShakeMaps from the USGS.

ShakeMaps from Loma Prieta Earthquake vs. South Napa Earthquake.

All the Potential Faults

It was only 20 years ago, but we often forget that the 1994 Northridge earthquake was on an unknown fault system. Early reports suggest the South Napa earthquake could have come from an unknown fault as well, which emphasizes that the focus should not always be placed solely on the well-known San Andreas Fault.

According to the California State Geologic Survey Map within the Bay Area, the main San Andreas Fault cuts through San Francisco and sections off Point Reyes. However, many other faults within the zone are also prominent and active enough to earn names. The Hayward Fault, Rodgers Creek, San Joaquin and Green Valley are the structural underpinnings of the long valleys characteristic to the region. What may be surprising, however, is that many of the small faults don’t have names at all, especially if they haven’t had major damaging activity in the recent past. These faults should also be considered by not only the modeling companies, but the insurance companies that write the risks. Further, the industry needs to keep in mind that the location of the epicenter is critical to determining expected damage and, so far, most of the major quakes in our lifetime have not been located under major population centers.

Sunday’s earthquake appears to have ruptured on or just west of mapped traces of the West Napa Fault, which has ruptured sometime in the past 11,000 years. The most seismically active areas have been between the longer Rodgers Creek Fault on the west and the Concord-Green Valley Fault to the east. It’s entirely possible that this earthquake occurred where the fault was covered by sediments, with recent movement that we didn’t know about until today. It’s important to reiterate that many faults have been active in the past 2.6 million years. However, numerous more are inactive and countless are still unknown.

California State Geologic Survey Map of Faults.

Massive Flooding

Early reports suggest damage is localized in the region surrounding Napa due to the rupture directivity to the northwest. River valley sediments in Napa Valley likely contributed to the amplification of shaking around Napa. Major river systems in the area are another factor that should be considered when analyzing the potential consequences of California earthquakes. While it seems unfair that California is getting hit with two disasters – the ongoing extreme drought and now a substantial earthquake – this overlap may actually be a good thing. As mentioned in other studies, if this earthquake had happened when water was more abundant, the aging levee system protecting islands within the Sacramento Delta would have been saturated and vulnerable to liquefaction during the earthquake. If those levees succumbed, their inundation would have drawn saltwater from the bay up into the delta system, which could have caused saltwater to reach the California State Water Project intakes. Considering the Delta is the water supply for two-thirds of Californians and supports central valley agriculture, contaminating the water intake would have been disastrous. That’s not the only relationship between the drought and earthquakes. Recently published research suggests that groundwater depletion in the San Joaquin Valley is linked to crustal flexing in the adjacent mountain ranges, potentially increasing seismicity of the region.

“The Big One”

Now, as a forecaster of the weather, sometimes I get asked “what is the latest state of forecasting earthquakes?” This is a common question, particularly after an earthquake such as this. There are currently various unknowns when trying to determine if this earthquake adds or reduces stress for “The Big One.” The bottom line is that it is impossible to predict the exact timing of an earthquake.

About every six years, the USGS updates its hazard maps to incorporate the latest geoscience research. The new USGS hazard map reveals that 16 states are at high risk of damaging earthquakes over the next 50 years, and these states have all historically experienced earthquakes with a magnitude 6.0 or higher. Some of the biggest changes have come in the Pacific Northwest and in California, where research has identified several areas capable of having the potential for larger and more powerful earthquakes than previously believed. A 2008 USGS study determined that the probability of a magnitude 6.7 or larger earthquake occurring within the greater Bay Area in the next 30 years was 63%. When the impact of the South Napa earthquake is included in the next batch of geophysical models for the region, those probabilities are likely going to stay the same. The earthquake released energy, but not enough to appreciably relieve tectonic stress within the region. It would take many more earthquakes of similar magnitude 6.0 to relieve the same amount of energy as just one magnitude 6.7 earthquake.