Hurricane Zeta is forecast to make landfall in Louisiana later today, Wednesday, and the hurricane is strengthening as it tracks towards the northern Gulf Coast, with sustained winds now reaching 100 mph and a chance of the storm sustaining Category 2 status through until it makes landfall.
Hurricane Zeta has benefited from a reduction in wind shear across the northern Gulf of Mexico in the last day and while not able to rapidly intensify as the sea surface temperatures are lacking some of the fuelling heat a hurricane typically needs, Zeta is strengthening slowly and may do some more before it strikes Louisiana later today.
Currently, hurricane Zeta is packing 100 mph sustained winds with stronger gusts to around 115 mph. Hurricane Zeta’s minimum central pressure has fallen to 975 mb and a little further strengthening before landfall remains possible, the NHC said in its latest update.
Hurricane Zeta’s hurricane force winds extend outwards from the center up to 35 miles and tropical storm force winds up to 150 miles. The NHC calls Zeta’s impending landfall a life threatening situation for those in its path.
For the insurance, reinsurance and insurance-linked securities (ILS) industry, the outlook has slightly worsened since yesterday, as hurricane Zeta has intensified a little more than anticipated and forecast.
Further strengthening is still possible and the real question for potential industry losses now lies in whether Zeta can sustain this upgraded Category 2 strength through to landfall, or if it weakens as it approaches land, which had been the original expectation with this storm.
The NHC said, “On the forecast track, the center of Zeta will approach the northern Gulf Coast this morning and make landfall in southeastern Louisiana this afternoon. Zeta will move close to the Mississippi coast this evening, and move across the southeastern and eastern United States on Thursday.
“Some additional strengthening is forecast this morning, and Zeta is expected to reach the northern Gulf Coast as a
hurricane before weakening over the southeastern United States on Thursday.”
Should hurricane Zeta sustain Category 2 status, with more intense winds, then the potential for impacts on land obviously rise and so too the potential for insurance and reinsurance market losses.
Our sources had been discussing hurricane Zeta’s potential market losses as being in the mid-hundreds of millions of dollars, to low single-digit billions at most, even if further intensification to a low-strength Category 2 storm occurs.
Our latest discussions suggest an increasing number are looking towards scenarios that could drive low to mid-billion dollars of losses, while some also point to the greater dollar value of exposure potentially in Zeta’s path, compared to other recent hurricanes affecting the north Gulf Coast.
A storm surge of up to 9 foot is forecast, with 3 to 5 foot more widely around the Louisiana and Mississippi coasts.
Rainfall totals are forecast as being up to 6 inches at most, as hurricane Zeta will move relatively quickly ashore and travel north, which also reduces the amount of time the storm surge affects the coast and hurricane force winds will impact the landfall area.
As the latest landfalling U.S. hurricane of 2020, Zeta has the potential to further erode some aggregate deductibles in reinsurance and catastrophe bonds, while some smaller carriers aggregate protection could end up responding again and allowing them to recover under reinsurance programs.
You can see the latest forecast wind speed intensity guidance from certain models, thanks to TropicalTidbits.com, below:
The 2020 Atlantic hurricane season has already caused somewhere around US $23 billion to US $26 billion of insurance and reinsurance market losses (based on averages of modelled estimates and including offshore as well as onshore insured losses), which storm Zeta will still take a little higher at least.