Make Your Hurricane Preparations Now

With the Atlantic hurricane season’s official start on June 1, the time to check your buildings and existing contingency plans—or start a new one—is now, during hurricane preparedness week.

For 2017, Colorado State University’s hurricane research team predicts slightly below-average activity of hurricanes making landfall, with a forecast of 11 named storms, four hurricanes, and two major hurricanes.

The 2016 season is seen as a wakeup call, as 15 named storms and seven hurricanes formed in the Atlantic Basin—the largest number since 2012. Among the hurricanes was Matthew, a Category 4, which devastated Haiti, leaving 546 dead and hundreds of thousands in need of assistance. After being downgraded to a Category 2, Matthew pummeled southeast coastal regions of the U.S., with 43 deaths reported and widespread flooding in several states.

Here are 10 preparedness steps offered by FEMA:

The Insurance Institute for Business & Home Safety (IBHS) warns that small businesses are especially vulnerable. Of businesses closed because of a disaster, at least one in four never reopens.

IBHS offers these steps for preparing a business for hurricane season:

  1. Have your building(s) inspected and complete any maintenance needed to ensure your building can stand up to severe weather.
  2. Designate an employee to monitor weather reports and alert your team to the potential of severe weather.
  3. Review your business continuity plan and update as needed, including employee contact information. If you do not have a business continuity plan, consider IBHS’ free, easy-to-use business continuity plan toolkit for small businesses.
  4. Remind employees of key elements of the plan, including post-event communication procedures and work/payroll procedures. Make sure all employees have a paper copy of the plan. Review emergency shutdown and start-up procedures, such as electrical systems, with appropriate personnel, including alternates.
  5. If backup power such as a diesel generator is to be used, test your system and establish proper contracts with fuel suppliers for emergency fuel deliveries.
  6. Re-inspect and replenish emergency supplies inventory, since emergency supplies are often used during the offseason for non-emergency situations.
  7. Test all life safety equipment.
  8. Conduct training/simulation exercises for both your business continuity and emergency preparedness/response plans.

Interstate Restoration has a day-by-day list of steps for business storm preparation, based on NOAA recommendations. They include research, planning and documenting, gathering emergency supplies, checking insurance coverage and supply chain and finalizing your plan.

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

Lloyd’s Finds Extreme Weather Can Be Accurately Modeled Independently

In a new report based on research from UK national weather service the Met Office, Lloyd’s has found that extreme weather events may be modeled independently. While extreme weather can be related to events within a region, these perils are not significant correlated with perils in other regions of the world.

The study’s key findings include:

  • Met Office research found that the majority of perils are not significantly correlated, but identified nine noteworthy peril-to-peril teleconnections, most of which are negatively correlated
  • Lloyds’ modeling finds that these correlations were not substantial enough to warrant changes to the amount of capital it holds to cover extreme weather claims
  • Even when there is some correlation between weather patterns, it does not necessarily follow that there will be large insurance losses. Extreme weather events may still occur simultaneously even if there is no link between them
  • An assumption of independence for capital-holding purposes is therefore appropriate for the key risks the Lloyd’s market currently insures
  • The methodology released in the report enables scenario modeling across global portfolios for appropriate region-perils

“This important finding supports the broader argument that the global reinsurance industry’s practice of pooling risks in multiple regions is capital efficient and that modeling appropriate region perils as independent is reasonable,” the report concluded.

According to Trevor Maynard, head of exposure management and reinsurance at Lloyd’s, “This challenges the increasingly held view among some regulators around the world that capital for local risks should be held in their own jurisdictions. Lloyd’s believes this approach reduces the capital efficiency of the (re)insurance market by ignoring the diversification benefits provided by writing different risks in different locations and, in so doing, needlessly increases costs, to the ultimate detriment of policyholders. Insisting on the fragmentation of capital is not in the best interests of policyholders.”

Check out the map below for further insight from the Met Office about large-scale weather perils that do demonstrate statistically significant correlation:

lloyd's extreme weather perils

Recap of 2016 Weather Events

The 2016 hurricane season, which ends today, has been the deadliest since 2005 and the most active and costliest since 2012. In all there were 15 named storms and seven hurricanes, three of them major hurricanes. Hurricane Matthew, a Category 5, was responsible for more than 1,600 deaths and insured loss estimates of about $7 billion.

Other major storms that hit the United States in 2016 include Winter Storm Jonas, Louisiana flooding, hailstorms, tornadoes and hurricanes. For a recap of 2016 storms check out Interstate’s year-in-review infographic:
yearinreviewinfographic