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12:39 PM
Nathan Golia
Nathan Golia
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Risk Modelers: Don't Worry Too Much About Early Hurricane Predictions

What does it mean when forecasts are so specific in assumptions that storms will hit the U.S. coast?

A couple weeks ago, private weather forecaster WSI predicted 15 named storms would form in the Atlantic this year. What's more, while the company noted that this would be a slight decrease from last years very active season, chief meteorologist Todd Crawford said in a statement, "…we do expect a much more impactful season along the U.S. coastline."

To me, this basically said: There will be a lot of strong storms, AND a couple should hit the southeast US (including the fragile Gulf of Mexico). Wondering if insurers should take this at face value, I reached out to risk modelers RMS and EQECAT.

"Those forecasts are still not very good because hurricane season doesn't really start posing a risk for property in the US until mid-July," EQECAT SVP of product architecture Tom Larsen told me. "They don't lend themselves to a lot of action" for insurance clients, he added, though he said that EQECAT looks at many forecasts over the course of the year.

Michael Kistler, Director, Nat Cat and Portfolio Solutions at RMS, said that his company "does not generally comment on commercially available seasonal hurricane forecasts" in an e-mail.

"Rather than an annual hurricane forecast, RMS publishes a forward-looking view of hurricane frequencies, on a rolling 5-year time horizon which we call our medium term view of hurricane frequency for the US Gulf and Atlantic coasts," he said. "Atlantic hurricane activity has remained persistently high since 1995, with strong evidence that higher than average activity rates are likely to persist for the foreseeable future."

However, he noted, "If RMS had been undertaking a five-year forecast during the 1940s and 1950s, it would similarly have been indicating higher activity than the historical average—just as through the 1970s and 1980s, when SSTs were cooler, RMS would have been indicating lower activity."

So it seems that while it's perhaps a safe assumption that there will be higher-than-average hurricane activity this year, the weather is inherently unpredictable, and it's definitely too soon to say that this increased activity will result in storms gashing the U.S. coast.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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