Hurricane Dorian has strengthened further overnight, continuing on a path that forecasters still suggest will result in a Florida landfall, but some forecasts are now suggesting a double-landfall as Dorian could cross Florida and make a second in the Gulf, while analysts are already talking $10 billion to $30 billion industry loss scenario.
Update, Sep 6th: Hurricane Dorian has weakened slightly but remains a Category 1 hurricane and continues to lash the coast of the Carolinas as it heads northwards. Our latest here.
Hurricane Dorian has now strengthened to have 85 mph winds with stronger gusts and a Florida landfall remains the model consensus for now.
Some are pointing to the potential for a double-whammy, with Dorian crossing Florida and making a second Gulf Coast landfall as well. While at the same time analysts are now talking about the potential for up to a ~$30 billion insurance and reinsurance market loss scenario.
The hurricane has been intensifying, with the central pressure dropping to 991 mb, at the same time as the structure of hurricane Dorian has become a little better arranged with a more defined eye emerging.
Now clear of the Caribbean Islands, hurricane Dorian has plenty of time to intensify further as it crosses warm sea surface temperatures (SST’s) on its way towards the Bahamas and Florida.
The latest hurricane forecast model runs still suggest that hurricane Dorian could be at major Category 3 intensity when it reaches Florida, which would be sustained winds of 111 mph or greater.
Even at a Category 2 landfall, hurricane Dorian would be packing sustained winds of 96 mph and greater, with higher gusts and bringing a storm surge and torrential rain to Florida as well.
There is still some uncertainty in the forecast, being four or more days out from a potential hurricane Dorian landfall in Florida.
Some forecasters suggest that with Dorian still of relatively small size, the intensity forecasts are not guaranteed. But others warn that Dorian will slow on approach to Florida, exacerbating impacts through stronger winds striking the state for longer.
Hence it still seems too early to talk impacts, although some certainly are now being raised.
Meteorologists are now discussing the potential for hurricane Dorian to cross the Florida peninsula, emerging back over the warm Gulf of Mexico waters, before making a turn to the north and a second landfall in the Florida panhandle region.
Such a scenario, if hurricane Dorian reaches the higher major Category 3 status, could create significant losses for the insurance and reinsurance industry, as well as for insurance-linked securities (ILS) and catastrophe bond investors.
With blocking ridges to the north, a Bermuda high to the east and additional weather patterns to the west as well, hurricane Dorian looks set to squeeze its way towards Florida, steered by a combination of all three factors.
Which again heightens the uncertainty associated with the hurricanes eventual landfall location and track beyond landfall, with some model run scenarios showing hurricane Dorian tracking across Florida into the Gulf and then north, others even showing Dorian curving across the Keys and going deeper into the Gulf before impacting the coast.
Almost all scenarios now show a U.S. coast landfall though and Florida remains the focus. Greater certainty should emerge with each model update from now on.
Analysts at Credit Suisse have begun to talk potential insurance and reinsurance industry losses from hurricane Dorian, pointing to scenarios where the storm could drive industry losses in the tens of billions.
Credit Suisse’s equity analyst team points to 2018’s hurricane Michael and its roughly $11 billion insurance and reinsurance market loss, highlighting that hurricane Dorian is currently heading for an area with much greater insured values in its path.
As a result, the analysts are including estimates of industry losses up to $30 billion in their analysis of how exposed major players in the industry could be.
However, they note that should the track move further south, towards Ft. Lauderdale and Miami, then even that could prove too low for a Category 2 to 3 hurricane Dorian landfall scenario.
Weather forecaster Accuweather has looked at the potential for economic losses and pegs them at up to $15 billion.
But, on the basis Dorian strikes Florida at Category 3 or near, that might seem a little low, when you consider how the insured losses finally panned out with Michael, Matthew and other recent storms.
Again, this all reflects the uncertainty remaining in the forecast, hence the talk of wide ranges within the earliest of loss estimates.
It is still too early to really have a good handle on the potential insurance, reinsurance, ILS and cat bond losses that hurricane Dorian could cause.
However, we understand there has been some tentative requesting for quotes on hedges such as industry loss warranties (ILW’s), as reinsurance markets look to establish the costs of adding last minute protection.
Share prices of exposed insurance and reinsurance companies have dipped already, on the potential for a hurricane Dorian landfall and reasonably significant industry loss.
Catastrophe bond trading is unlikely to emerge until there is a little more certainty in the forecast and even then, as seen with other storms, this may be minimal if the forecast suggests wide ranges of potential loss outcomes.
As we explained yesterday, reinsurers are cited as the group likely to be hit hardest by hurricane Dorian, as primary insurers remain well-protected and retaining less risk.
But, as we also explained in that article, reinsurance firms have been using increasing amounts of third-party capital, through their own vehicles and joint-ventures, as well as private ILS deals and quota shares, which could see a decent share of any loss falling to the ILS market again.
It’s going to be a challenging end to the week for the reinsurance and ILS market, as participants try to understand their potential exposure to hurricane Dorian and how the storm will pan out (single landfall or even a double landfall at Cat 2 or 3, or perhaps something more benign).
The level of uncertainty in the potential impact scenarios remains very high at this time, but should lessen by the weekend.
Below is the latest intensity model output from TropicalTidbits.com
Below are the latest GFS ensemble hurricane forecast model tracks for Dorian, from TropicalTidbits.com.
NOAA’s latest on Dorian is below:
At 500 AM AST (0900 UTC), the center of Hurricane Dorian was located near latitude 20.5 North, longitude 66.6 West. Dorian is moving toward the northwest near 13 mph (20 km/h), and this general motion is expected to continue through Friday. A west-northwestward motion is forecast to begin Friday night and continue into the
weekend. On this track, Dorian should move over the Atlantic well east of the southeastern and central Bahamas today and on Friday, and approach the northwestern Bahamas on Saturday.
Maximum sustained winds are near 85 mph (140 km/h) with higher gusts. Strengthening is forecast during the next few days, and Dorian is expected to become a major hurricane on Friday.
Hurricane-force winds extend outward up to 15 miles (30 km) from the center, and tropical-storm-force winds extend outward up to 90 miles (150 km).
The minimum central pressure based on earlier Air Force Reserve Hurricane Hunter data is 991 mb (29.27 inches).
We will update you on hurricane Dorian as it proceeds and the threat it could pose to global insurance, reinsurance and ILS market interests.
You can always visit our 2019 Atlantic hurricane season page for the latest.
View all of our Artemis Live video interviews and subscribe to our podcast.
All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.
Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.