With the 2013 hurricane season, which officially runs from 1 June to 30 November, now underway, all the main forecasters are predicting another above-average season for windstorm activity.
The National Oceanic and Atmospheric Administration (NOAA) is the latest to predict 13-20 named storms, of which 3-6 could become major (category 3+) hurricanes. Much of this is due to warmer sea temperatures in the Atlantic and the relatively low likelihood of an El Niño event. CSU currently anticipates an above-average probability for major hurricanes making landfall along the US coastline at 72% vs. the average of 52%. Historically, September has the highest level of windstorm activity, followed by August.
Joanna Parsons, insurance analyst at Westhouse, comments: “Predicting hurricane activity is one thing (and even then the variables are substantial), but accurately forecasting landfall and hence its potential impact on the re/insurance industry is another, as these storms are steered by atmospheric conditions that vary throughout the season. One of the key reasons that the Florida catastrophe rates are falling is because this class is very loss sensitive and the last time Florida suffered a major hurricane loss was 2005 (Wilma).
"Arguably, this means it is overdue a windstorm – and indeed Ike and Sandy both showed that it does not need to be a major hurricane to cause considerable insured loss – let alone the human and economic devastation of such disasters. We believe the market is very sensitive to claims activity despite the influx of capital and a major loss would, in our view, inject further discipline into pricing and rates would return to previous highs."
The Lloyd’s sector, Parsons says, would be an immediate beneficiary, in particular Amlin, Catlin, Hiscox and Lancashire. "With no major losses ytd, the June/July renewals indicate that Florida catastrophe rates are down 15-20% YoY (we expected an average of -15%), albeit this should be viewed in the context of pricing being previously at peak levels,” she concludes.
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