Tag Archives: Coastal Property

Early Hurricane Forecasts

Early 2011 Atlantic hurricane season forecasts are coming in and based on the latest information it appears we can continue to expect above average activity when the season gets underway June 1.

Here’s a glance at how they stack up.

Forecasters at the Colorado State University’s (CSU) Tropical Meteorology Project are predicting 16 named storms, with 9 hurricanes and 5 major hurricanes (Category 3-4-5). They are also calling for above average chance that a major hurricane will make U.S. and Caribbean landfall.

London-based consortium Tropical Storm Risk is calling for 14 named storms, with seven to eight hurricanes and three to four major hurricanes. TSR forecasts Atlantic basin and U.S. landfalling tropical cyclone activity at about 25 percent above the 1950-2010 norm.

Accuweather.com Hurricane Center meteorologists are also predicting an active season for 2011, with 15 named storms, eight of which are expected to become hurricanes, with three major hurricanes. They also expect more impact on the U.S. coastline than last year.

For insurers these early forecasts give a general idea of what’s to come, but of course, it’s still very early days.

As CSU says:

“Everyone should realize that it is impossible to precisely predict this season’s hurricane activity in early April.†

Updated forecasts will be released around June 1, when hurricane season opens.

Check out I.I.I. hurricane facts and stats.

Peering Into the 2011 Atlantic Hurricane Season

With the 2010 Atlantic hurricane season closed, it’s already time to look ahead to next year’s hurricane season.

Forecasters at the Colorado State University’s (CSU) Tropical Meteorology Project and London-based consortium Tropical Storm Risk (TSR) have just released their extended range forecasts for the 2011 season.

Both are forecasting that another above-average or very active season is likely.

The team at CSU is predicting 17 named storms, with 9 hurricanes and 5 major hurricanes (Category 3-4-5). They are also calling for above-average chance that a major hurricane will make U.S. and Caribbean landfall.

Similarly, TSR is forecasting 15.6 named storms, 8.4 hurricanes and 4.0 intense hurricanes. TSR says there is 66 percent chance that activity in 2011 will be in the top one-third of years historically.

Now for the caveats. Both teams acknowledge that this far out their forecast skill is low.

TSR says:

It is clear that the skill of the extended range hurricane forecasts issued in early December, while positive, is low. Skill climbs slowly as the hurricane season approaches. Moderate skill levels are achieved in early June and good skill levels in early August.†

CSU also comments:

Everyone should realize that it is impossible to precisely predict next season’s hurricane activity at such an extended range†¦we advise the readers to use these forecasts with caution.†

Dr. Jeff Masters’ Wunderblog has  further analysis of the December forecasts.

Check back for our coverage of  next year’s  forecasts as hurricane season gets closer.

Check out I.I.I. hurricane facts and stats.

Property Insurers of Last Resort: Still Growing

Five years since Hurricane Katrina and with no major hurricane making U.S. landfall in 2010, the assumption might be that the residual property market in hurricane-exposed states would have reduced significantly in size and regained financial equilibrium.

However, this year’s report by the Insurance Information Institute (I.I.I.), like the reports of the last two years, records the ongoing growth in the exposure base of the residual market property insurers along with the still-precarious financial condition of some plans.

According to the newly updated paper, total exposure to loss in the residual market (FAIR and Beach/Windstorm plans) rose from $419.5 billion in 2005 to $703.0 billion in 2009 – an increase of 68 percent – and since 1990 exposure to loss in the plans has surged by 1,184 percent.

Arguably many of the plans have become home for the most highly exposed, wind-only risks – in other words the least attractive types of business. In some cases, this has left plans with huge concentrations of risk, the I.I.I. study notes.

Consequently, it is not surprising that many of the plans experience severe financial difficulties in certain years.

Further, because most of these plans do not charge rates that reflect the true cost of risk, demand for the coverage they provide remains high.

As long as the plans continue to grow, state finances will remain under threat and ultimately taxpayers, many of whom live nowhere near the coast, will continue to face the prospect of increased assessments in the years ahead, according to the I.I.I.

State-Run Insurers Spur Risky Coastal Development

State-run beach and windstorm plans in some states provide unintentional incentives for economic development in areas vulnerable to severe wind damage, according to a new study from the Insurance Research Council (IRC).

The study comes just months after a Government Accountability Office (GAO) report that found that most state-run plans do not charge premium rates that reflect the full risk of loss.

Insurance Information Institute (I.I.I.) research and analysis has also found that over the last four decades, state-run property insurers have experienced explosive growth both in terms of the number of policies issued and the exposure value covered.

The combination of burgeoning exposure growth and inability to charge rates that are commensurate with the risk means that a number of residual market property plans in hurricane-exposed states are in a precarious financial situation.

The IRC study focuses on the role of beach and windstorm plans and explains how state-run plans interact with voluntary homeowners insurance markets.

It also describes how each of the five state beach and windstorm plans – Alabama, Mississippi, North Carolina, South Carolina and Texas – and two state wide plans (Louisiana and Florida) would weather a hurricane catastrophe.

Check out an online article at National Underwriter for more on this story. Check out I.I.I. information on residual markets for an explanation of state-run property insurers.