Research performed by global reinsurance broker and risk capital advisory TigerRisk Partners finds that the phenomena of hurricane stalling over land has not become more frequent, but the dollar value of damages caused are rising as exposures increase.
The United States saw two significant stalling hurricanes in the last two years, both of which caused significant economic damages due to the prolonged and torrential rainfall as well as the ensuing floods.
Hurricane Harvey in 2017 became the second most costly hurricane on record after Katrina (2005), driving economic damages of over $125 billion, while the private and public insurance and reinsurance industry paid for at least $19 billion.
Then hurricane Florence in 2018 stalled over North Carolina, resulting in an economic impact of around $45 billion, with insurance and reinsurance interests taking around $4.6 billion, TigerRisk says.
In both cases, the stalling of the hurricanes over land led to the significant water related impacts, from rainfall and extreme flooding.
Again in both cases, this resulted in a wide gap between economic and insured losses, given the lack of flood insurance penetration across the United States and the general protection gap that exists for these scenarios.
But is the Harvey and Florence stalling of hurricanes something we should expect to see more frequently, which would of course have significant ramifications for insurance and reinsurance markets?
TigerRisk believes not. The company said that its research and study of thousands of storms found no trend towards more frequent stalling hurricanes.
TigerRisk’s analytics team reviewed weather data as far back as 1851, featuring thousands of hurricanes and tropical storms.
“Our research identified 37 tropical storms that had stalled once they had come ashore,” explained Anna Neely, Research and Development Analyst at TigerRisk. “Only in six cases did they occur back-to-back in consecutive years.”
As a result, TigerRisk said that its research determined that the frequency of stalled storms has remained relatively constant over that period.
However, the company believes that further research is required, on what actually causes tropical storms and hurricanes to stall, as well as the unique way in which these storms cause damage.
What the research did make evident though was the increasing costs, aligned with constantly growing levels of insurance and reinsurance exposure in the paths of tropical storms and hurricanes.
Even if storms continue to stall at the normal rate seen, TigerRisk warns that the increasing dollar value of the damages caused points to the inadequacy of flood control and insufficient flood insurance coverage.
In addition, TigerRisk warns that considering the growing exposure in coastal areas of the United States, the risks that the industry faces from stalling hurricanes may be growing even if the frequency is not.
These stalling hurricanes result in long-duration tropical storm and hurricane force wind exposure, as well as excessive levels of rainfall, which can drive significant losses to private and public re/insurer.
As the value of property, infrastructure and assets at risk increases exponentially, while penetration of flood coverage steadily rises and is privatised, the industry should expect rising loss impacts from these stalling storms.
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