Elevated Gulf landfall risk this hurricane season: Twelve Capital

There is an elevated risk of Gulf Coast hurricane landfalls during the 2021 Atlantic tropical storm and hurricane season, while overall activity levels are expected to be broadly in line with the climatological norm, according to ILS investment manager Twelve Capital.

The insurance-linked securities (ILS), catastrophe bond and reinsurance focused investment manager points to a very slightly higher than the baseline risk of US east coast hurricane landfalls this year, a slightly below baseline risk of landfalls for Main Development Region storms, but an elevated risk for Gulf and West Caribbean hurricane landfalls.

ILS and reinsurance focused investment manager Twelve Capital works with machine learning focused climate technology company reask on hurricane risk analysis and the pair have developed a proprietary North Atlantic hurricane seasonal forecast methodology.

Overall, Twelve Capital and Reask say that 2021 hurricane activity levels are expected to be aligned with recent active years.

In fact, their machine learning derived forecast calls for 16.9 named storms to form during the 2021 season, with the Main Development Region one area of higher storm numbers, but which is expected to have lower landfall risk because of steering current patterns.

Twelve Capital and Reask explained, “Predictors of the dominant August-October steering flow, associated with the strength of the Bermuda high, are negative this year. This suggests a potential set up where the dominant steering flow could have less effect in steering activity towards the US coastline, driving a reduction in the landfall risk distribution from the MDR.”

The MDR is forecast to have 6.6 named storms, above the baseline 5.8. But landfalls for this region are only seen as 1, below the 1.2 baseline average.

On the Gulf and East Coast regions they explained, “The Gulf region is forecast to expect 4.6 named storms compared to a baseline mean of 3.5 with landfall probability above average values.

“Storms that form in the East Coast region have a forecast expected value of 5.7 relative to the baseline mean of 5.2 with landfall probability in line with the baseline climatology.”

Sea surface temperatures (SST’s) may be another driver of activity, Twelve Capital and Reask’s work shows, with SST anomalies showing warmer than average waters in the mid-tropics and part of the Gulf.

“This, associated with the lack of any signal for an El Niño event contributes to driving a high SST signal in this year’s forecast,” the update explains.

You can download a copy of the full forecast document from Twelve Capital and Reask here.

Twelve Capital also commented on tropical storm Elsa this morning, saying that, “At current forecast intensity levels and projected path, Elsa is not expected to have any material impact on the ILS market or Twelve Capital’s portfolios.”

Insurance, reinsurance and ILS market interests can keep track of the season over on our 2021 Atlantic tropical storm and hurricane page.