Cyclone Marcia to hit Category 5 before landfall in Queensland, Australia

Cyclone Marcia has undergone a period of rapid intensification as it approaches the Queensland, Australia coastline, with forecasters now predicting a Category 5 landfall with wind gusts as high as 180mph anticipated.

Cyclone Marcia had been expected to be a relatively benign storm, with little threat to Queensland and to the insurance industry. However, perhaps demonstrating how challenging forecasting cyclone intensification is, Marcia has rapidly grown into a severe and dangerous storm and is expected to hit Category 5 by landfall.

Interestingly, there are now a number of catastrophe bonds with exposure to Australian cyclone risks, including Queen Street X Re Ltd., Queen Street IX Re Ltd. and Queen Street VIII Re Ltd., as well as QBE’s VenTerra Re Ltd. (Series 2013-1) cat bond.

The insurance-linked securities (ILS) market will also have exposure to Australian cyclone risks through collateralized reinsurance and vehicles such as sidecars. How much exposure there could be is impossible to say, but it is likely to be a fairly considerable exposure to the peril.

Exposure to this storm is much harder to predict. Queensland is perhaps the most exposed area to cyclone risks, so any exposure will be concentrated there. However, as always, the exposure will be driven by losses and the actual impact to property in the region of landfall and, as with a lot of Queensland, the region is not the most populated. However if Marcia happens to strike new a population center the insured losses could be reasonably large.

So it’s far too early to say whether any of the catastrophe bonds are seriously at risk. It’s more likely that if losses are high from cyclone Marcia then collateralized reinsurance may be the most at risk, due to the participation of ILS managers in Australian reinsurance programs. Of course the same threat is posed to traditional reinsurers as well, which will also have exposure to the storm.

The Australian Bureau of Meteorology says that cyclone Marcia has a “very destructive core” and is expected to make landfall early on Friday local time between Mackay and Gladstone, Queensland.

Mackay has a population of around 75,000, while Gladstone has almost 30,000. Interestingly, this region produces almost a third of Australia’s cane sugar, which suggests that crop insurers and reinsurers could be hit.

The region has been hit by major cyclones before, with one storm, Ului, in 2010 causing 60,000 properties to lose power. That was a Category 3 storm though and Marcia would cause much more severe damage.

The Bureau of Meteorology says:

Intensity: Category 4, sustained winds near the centre of 195 kilometres per hour with wind gusts to 270 kilometres per hour.

Location: within 9 kilometres of 20.6 degrees South 150.4 degrees East, estimated to be 140 kilometres east northeast of Mackay and 280 kilometres north of Yeppoon.

Movement: west southwest at 13 kilometres per hour.

Severe tropical cyclone Marcia, a category 4 cyclone has become slow moving in recent hours. It is expected to turn more southwest during the next few hours and make landfall between Mackay and Gladstone early on Friday. It is forecast to reach category 5 by landfall.

The VERY DESTRUCTIVE CORE of severe tropical cyclone Marcia, with gusts to 295 km/h, is expected to cross the coast between Mackay and Gladstone on Friday morning.

DESTRUCTIVE WINDS are expected to develop about coastal and island communities between Mackay and Burnett Heads tonight.

GALES are now occurring about coastal and island communities between Mackay and Double Island Point, and are expected to extend north to Bowen later this evening and inland to areas including Blackwater, Moura, Biloela, Monto, Mundubbera, Taroom, and Murgon overnight and Friday.

Abnormally high tides will be experienced today and Friday with water levels expected to rise above the highest tide of the year on the high tide.

Coastal residents between Mackay and Double Island Point are specifically warned of the dangerous storm tide as the cyclone crosses the coast. The sea is likely to rise steadily up to a level well above the normal tide, with damaging waves and flooding of some low-lying areas close to the shoreline. People living in areas likely to be affected by this flooding should take measures to protect their property as much as possible and be prepared to follow instructions regarding evacuation of the area if advised to do so by the authorities.

Dangerous surf is expected about exposed beaches south of Sandy Cape.

Thunderstorms are expected to develop near the coast between St Lawrence and Hervey Bay ahead of tropical cyclone Marcia crossing the coast. These thunderstorms may produce localised areas of destructive wind gusts in excess of 125 km/hr about coastal and island communities.

Heavy rainfall will develop about coastal and island communities between Mackay and Double Island Point tonight, particularly over areas to the south of the system. A Flood Watch is current for the area.

Tracking map for Cyclone Marcia:

Cyclone Marcia tracking map

Radar loop for Cyclone Marcia:

Radar loop for Cyclone Marcia

It’s also worth noting that another tropical cyclone is approaching the Northern Territories, Category 4 Cyclone Lam will make landfall soon with winds around 120mph. Another severe storm but expected to be less impactful to the insurance industry than Marcia.

The BOM says on Cyclone Lam:

Intensity: Category 4, sustained winds near the centre of 165 kilometres per hour with wind gusts to 230 kilometres per hour.

Location: within 20 kilometres of 11.9 degrees South 135.5 degrees East, estimated to be 20 kilometres north northwest of Galiwinku and 145 kilometres west northwest of Nhulunbuy.

Movement: southwest at 6 kilometres per hour.

The VERY DESTRUCTIVE core of Severe Tropical Cyclone Lam is continuing to track southwest and is now impacting the coast near Elcho Island. The cyclone is expected to continue to slowly move over the coast between Milingimbi and Gapuwiyak overnight tonight and during early Friday morning. Severe Tropical Cyclone Lam is then expected to weaken during Friday as it moves inland over Arnhem Land.

VERY DESTRUCTIVE winds with gusts greater than 230 kilometres per hour should continue over the southern Wessel Islands and the mainland coast near Elcho Island before extending to between Milingimbi and Gapuwiyak overnight.

DESTRUCTIVE winds with gusts to 130 kilometres per hour are being experienced at Galiwinku and should develop about the mainland coast between Milingimbi and Gapuwiyak this evening before possibly extending west to Maningrida and adjacent inland areas from early Friday morning.

GALES with gusts to 110 kilometres will continue to develop in coastal areas from Milingimbi to Gapuwiyak during the next few hours and extend further east to Nhulunbuy and west to Maningrida and adjacent inland areas later today and overnight. GALES may also extend as far west as Goulburn Island and inland to Bulman during Friday as the cyclone moves inland. GALES may extend further south to Numbulwar and Groote Eylandt and inland areas during Friday, and south to Port Roper late on Friday depending on the track the cyclone takes.

Coastal residents between Milingimbi and Nhulunbuy, including Elcho Island, are specifically warned of a VERY DANGEROUS STORM TIDE as the cyclone centre approaches the coast on Thursday night and into Friday. Tides will rise significantly above the normal high tide, with DAMAGING WAVES and VERY DANGEROUS FLOODING.

A STORM TIDE between Nhulunbuy and the Queensland border is expected around the high tide on Friday. Tides are likely to rise significantly above the normal high tide, with DAMAGING WAVES and DANGEROUS FLOODING.

HEAVY RAIN may cause flooding of low-lying areas in the northeast Top End tonight and Friday.

Tracking map for Cyclone Lam:

Cyclone Lam tracking map

As we said, it’s very hard to predict what the impact could be from these storms, however cyclone Marcia in particular is a threat to the insurance industry and at the moment it looks as if combined the hit to Australian insurers could be significant enough to create some claims on reinsurance treaties.