2017 Atlantic Hurricane Season Outlook

With the official opening of 2017 Atlantic hurricane season fast approaching, researchers appear cautiously optimistic the relatively quiet streak will continue.

Today, Colorado State University’s Tropical Meteorology Project released the extended range forecast of 2017 Atlantic seasonal hurricane activity, predicting slightly below-average activity in the Atlantic basin, with a forecast of 11 named storms, four hurricanes, and two major hurricanes.

Philip Klotzbach, CSU

The probability of at least one major (Category 3+) hurricane making landfall on the entire U.S. coastline is 42%, compared to an average of 52% over the past century. The probability of such a storm hitting the East Coast, including peninsula Florida is 24%, compared to an average of 31%. Thus, CSU noted, the estimated probability of a major hurricane making landfall in the U.S. this season is approximately 80% of the long-period average.

Hurricane activity may not be as critical a determinant for how insurers and property-owners will fare, however. Aon Benfield’s Global Catastrophe Recap reports have consistently noted the rising toll of economic and insured losses due to severe weather events including severe thunderstorms, hailstorms, and flash flooding. In Texas alone, for example, Aon Benfield reports the state incurred record thunderstorm-related losses for the year, with insurers citing costs exceeding $8.0 billion.

Other recent studies support this trend. In the Willis Re and Columbia University report Managing Severe Thunderstorm Risk, researchers found the risk to U.S. property from thunderstorms is just as high as from hurricanes. Their review of Verisk Analytics loss statistics for 2003 to 2015 found the average annual loss from severe convective storms including tornadoes and hailstorms was $11.23 billion, compared to $11.28 billion from hurricanes. Considering the past decade alone, severe convective storms posed the largest annual aggregated risk peril to the insurance industry.

willis re severe convective storms

Disaster Losses Climb as Protection Gap Widens: Swiss Re Sigma Study

Global Economic losses from disaster events almost doubled in 2016 to $175 billion from $94 billion in 2015, according to the most recent Sigma Study from the Swiss Re Institute.

Insured losses also rose steeply to $54 billion in 2016 from $38 billion in 2015, the study found. This led to a “protection gap,” as the company calls it, of some $121 billion, the difference between economic and insured losses, a figure highly indicative of the opportunity for greater insurance penetration, according to Swiss Re. “The shortfall in insurance relative to total economic losses from all disaster events…indicates the large opportunity for insurance to help strengthen worldwide resilience against disaster events,” said the report. The gap was $56 billion in 2015.

Total economic and insured losses in 2015 and 2016:

The two headline loss figures are the highest since 2012 and end a four-year decline as the year saw a higher amount of significant disaster events including earthquakes, storms, floods and wildfires worldwide. The report noted that some events hit areas with high insurance penetration, leading to the 42% jump in insured losses.

Despite the precipitous rise in both economic and insured losses, human losses plummeted to approximately 11,000 lost or missing in 2016, down from more than 26,000 in 2015.

Of the 327 disaster events last year, 191 were natural disasters while 136 were man-made. Regionally, Asia experienced the most disaster events with 128 leading to approximately $60 billion in economic losses. Asia also had the single most costly disaster event of 2016 as the April earthquake on Kyushu Island, Japan caused an estimated $25 billion-$30 billion in economic losses.

Insured losses of $54 billion almost equaled the $53 million inflation-adjusted annual average of the past 10 years, said the report, despite being 42% higher than 2015’s $38 billion. Natural catastrophes accounted for $46 billion of insured losses, equal to the 10-year annual average, as man-made disasters led to $8 billion of insured losses, according to the report.

“In 2016, both economic and insured losses were close to their 10-year averages. Insured losses made up about 30% of total losses, with some areas faring much better because of higher insurance penetration,” Kurt Karl, Swiss Re’s chief economist said in a statement.

More than half of insured losses occurred in North America as a record number of severe convective storm events hit the region. These included an April hail storm in Texas, which caused $3.5 billion in economic loss and $3 billion in insured loss as some 86% of losses were covered. An August system brought severe storms and flooding to Louisiana, causing $10 billion in economic loss and $3.1 billion in insured loss.

The region saw several major disaster events.

In May and June, wildfires in Alberta and Saskatchewan, Canada caused $4 billion in economic losses and $2.8 billion in insured losses, Canada’s largest-ever insurance loss. The fire consumed 590,000 hectares of land and caused the evacuation of about 88,000 people. In October, hurricane Matthew, the first Category 5 storm in the North Atlantic since 2007, led to $12 billion in economic losses and $4 billion in insured losses while also, sadly, causing the greatest loss of life as 700 were lost, mainly in Haiti.

Flooding across Europe and China was also devastating at times. In May and June, severe rain and floods hit Belgium, France and parts of Germany, causing economic losses of $3.9 billion and insured losses of $2.9 billion. Flooding along China’s Yangtze River basin caused an estimated $22 billion in economic losses but low insurance penetration, in contrast to Europe, led to insured losses of just $400 million, according to the report.

Software May Help Oil Companies Determine a Location’s Earthquake Potential

New software for monitoring the probability of earthquakes in a targeted location could help energy companies determine where they can operate safely.

The free tool, developed by Stanford University’s School of Earth, Energy & Environmental Sciences, helps operators estimate how much pressure nearby faults can handle before rupturing, by combining three important pieces of information:

  • Location and geometry of the fault
  • Natural stresses in the ground
  • Pressure changes likely to be brought on by injections

“Faults are everywhere in the Earth’s crust, so you can’t avoid them. Fortunately, the majority of them are not active and pose no hazard to the public. The trick is to identify which faults are likely to be problematic, and that’s what our tool does,” said Mark Zoback, professor of geophysics at Stanford, who developed the approach with graduate student Rail Walsh.

Fossil fuel exploration companies have been linked to the increased number of earthquakes in some areas—Oklahoma in particular—that have been determined to be the result of fracking. According to the Dallas Morning News:

Only around 10% of wastewater wells in the central and eastern United States have been linked with earthquakes. But that small share, scientists believe, helped kick-start the most dramatic earthquake surge in modern history.

From 2000 — before the start of America’s recent energy boom — to 2015, Oklahoma saw its earthquake rate jump from two per year to 4,000 per year. In 2016, its overall number fell to 2,500, but its quakes grew stronger.

Five other states, including Texas, Arkansas and Kansas, have seen unprecedented increases in ground shaking tied to the wells, although North Texas had no earthquakes strong enough to be felt last year.

The insurance industry has also been monitoring the rise in temblors. A Swiss Re report concluded, “It’s highly likely that this dramatic rise in earthquake occurrence is largely a consequence of human actions.”

According to the report:

Along with the increase in seismicity, Oklahoma has seen a growth in its oil and natural gas operations since 2008, specifically hydraulic fracturing (often referred to as “hydrofracking” or “fracking”) and the disposal of wastewater via deep well injection. Both hydrofracking and deep well injection involve pumping high-pressure fluids into the ground. A consensus of scientific opinion now links these practices to observed increases in seismic activity. Earthquakes where the cause can be linked to human actions are termed ‘induced earthquakes,’ and present an emerging risk of which the insurance industry is taking note.

Weather Threatens Oroville Dam Emergency Efforts

As measures are taken to repair a damaged spillway at the Oroville Dam in Northern California, weather forecasters are calling for rain later this week. Almost 200,000 people were evacuated from their homes below the dam, the largest in the country, on Feb. 12 as erosion of the dam’s emergency spillway threatened to flood the towns below.

While the situation was said to have stabilized on Sunday morning, conditions worsened and evacuation orders were issued. Roads in the area quickly backed up as a result, according to reports.

The dam’s main spillway was damaged after a winter season of record rains and snows following years of drought in the state.

Photo: California Department of Water Resources

California Representative John Garamendi told MSNBC that the evacuation was essential. “Fortunately when they were able to open the main spillway gates. That began to lower the reservoir level, because the water coming into the reservoir was about half of what they were able to expel down the main spillway, so it’s stabilized.”

The next issue, he said, is whether the spillway can be patched up “sufficiently to weather the storms that are clearly ahead of us.” Garamendi added that the months of March and April are the heavy storm season in the state.

Sheriff Kory Honea of Butte County said at a press conference that the Department of Water Resources (DWR) reported that the dam’s erosion is not advancing as rapidly as they thought. He said a plan is in place to plug the hole in the spillway by dropping large bags of rocks by helicopter. The DWR said that another measure being taken to relieve pressure on the spillway has been to raise the rate of discharge water from 55,000 cubic feet per second to 100,000 cfs, which it said has been working.

Helicopters transport large bags of rocks from the Oroville Dam parking lot, to the erosion site at the Oroville Dam auxiliary spillway in California, to help fight further erosion, February 13, 2017. Oroville is in Butte County. Florence Low / California Department of Water Resources

The New York Times reported that Northern California is close to 225% above normal rainfall levels since Oct. 1. According to the Times:

Repeated rounds of rain have pounded the area in recent weeks, rapidly raising the water level at Lake Oroville, the second-largest reservoir in California and a linchpin of the state’s water system. On Tuesday, a gaping hole opened in the main spillway that is used to release extra water. Early Saturday, an adjacent emergency spillway was also put into use, the first time water flowed over it since the dam was finished in 1968, department officials said.

State officials have said the 770-foot Oroville Dam itself, the nation’s tallest, is sound.

The problems with Oroville Dam are not a surprise to some. In 2005, during a relicensing process for the dam, three environmental groups warned the DWR of potential dangers with the emergency spillway, which is not a concrete spillway, but a concrete lip with a dirt hillside below. The concern was that the hillside could be easily eroded in the case of an emergency.

The Washington Post reported:

The upgrade would have cost millions of dollars and no one wanted to foot the bill, said Ronald Stork, senior policy advocate for Friends of the River, one of the groups that filed the motion.

“When the dam is overfull, water goes over that weir and down the hillside, taking much of the hillside with it,” Stork told The Washington Post. “That causes huge amounts of havoc. There’s roads, there’s transmission lines, power lines that are potentially in the way of that water going down that auxiliary spillway.”

Federal officials, however, determined that nothing was wrong and the emergency spillway, which can handle 350,000 cubic feet of water per second, “would perform as designed” and sediment resulting from erosion would be insignificant, according to a July 2006 memo from John Onderdonk, then a senior civil engineer for the Federal Energy Regulatory Commission.

Garamendi said that “What happened with the widening of the sinkhole was the result of someone overlooking the problems, including the fact that there was no concrete apron on the spillway.”

He also noted that while there will most likely be federal dollars to help rebuild the dam, “This is just one really startling, quite tragic and potentially catastrophic example of what’s happened to the infrastructure across America. We’ve seen bridges collapse in Minnesota, we’ve seen them on I-5 in Washington State and now this reservoir, which is the linchpin of California’s water system.”