“hurricane” status, neither of which were
defined as “major.” To their credit, the
veteran CSU forecasters did issue a mea
culpa of sorts.
“It was one of the largest busts for
our research team in the 30 years we’ve
been issuing this report,” said Klotzbach,
adding “These [predictions] should be
judged on their overall track record of
success, not on a single or a few unsuccessful seasonal forecasts. ”
The previous year, there were 19 tropical storms, 10 of which were upgraded to
hurricanes. Of those 10, two were classified as major.
Tepid hurricane activity is interesting
on many levels and carries with it some
notable implications for the p&c industry in terms of forecasting and insurer
solvency. Take, for instance, Moody’s
findings presented in its annual report.
A summary is located on page 24 of
this article. When evaluating exposures,
hurricanes would top the list in terms
of the capability to rock insurers at the
very core. So it would seem the industry
dodged the proverbial bullet.
Even so, Moody’s contends that other
severe storms—including tornadoes
and hailstorms—have been a source of
significant volatility in recent years. According to PCS, between 1993 and 2012,
tornadoes comprised about 36 percent
of all U.S. insured catastrophe losses.
Although such storms do not generally
threaten insurer capital to the extent that
their drier counterparts do (hurricanes
and earthquakes) they nevertheless can
cause significant earnings volatility.
Moreover, from a catastrophe risk
modeling standpoint, severe storms are
problematic. Several factors make them
notoriously difficult to accurately model.
In comparison to hurricanes and earthquakes, data is more difficult to observe,
with historic data more elusive, PCS adds.
Insurers and their risk management cohorts are responding with creative strategies, however. For starters, many companies have increased annual catastrophe
budgets to reflect the elevated high-frequency, low-severity events in recent years.
ing disaster, only to be met with derision.
A Conspicuous Absence
Luckily the tools at the industry’s disposal have progressed eons since. Still,
the revered scientists at Colorado State
University (CSU) have some explaining to
do. By all accounts, their projections were
a colossal failure. Phil Klotzbach and William Gray had predicted an “above average” 2013 Atlantic hurricane season, which
would later be characterized by what was
missing—a storm of Sandy proportions.
Klotzbach and Gray had predicted that
18 tropical storms and nine hurricanes—
four of which would reach Category 3 or
higher—would form. Hurricane Hum-berto took the initiative, forming on Sept.
11, but fell mere hours short of setting a
record. Then in early October, Tropical
Storm Karen was poised to hit the Gulf
Coast and had the potential to develop
into a hurricane while approaching the
United States. Yet, in the hours leading up
to landfall, Karen had a change of heart,
err, atmospheric conditions shifted, dismantling her resolve.
Karen eventually had a minimal im-
pact when moving through the coastal
area. Ultimately, 2013 would witness only
13 named storms, with just two reaching
“Many predicted that 2013 would be a
record year of catastrophic destruction,”
said Dr. Thomas Jeffery, senior principal
scientist for CoreLogic. “The number
of natural disasters that typically cause
widespread destruction—mainly hurri-
canes, wildfires and tornadoes—were far
less than anticipated and [were far less]
compared to last year’s record-setting
Comparatively low in the natural di-
saster arena, 2013 witnessed one of the
quietest Atlantic Hurricane seasons since
1995. For the first time in nearly 20 years,
there wasn’t a single major storm register-
ing a Category 3 or greater.
“[Last year] was one of the lightest
hurricane seasons in terms of catastrophe losses, but storm frequency was
comparable to previous years,” explains
Joe Louwagie, assistant vice president of
Property Claim Services (PCS), a division of Verisk Analytics.
Nevertheless, a succession of unfortunate weather patterns in late November
left many ambling to find shelter for the
holidays and the foreseeable future. As
with any insured loss, there were lessons
to be gleaned and motivation to do a better job of handling claims while mitigating future risk.
By reflecting on this past catastrophe season, insurance adjusters and risk
managers especially can analyze trends
and patterns, identifying potential future
complications and events. Historically,
catastrophe forecasting has been a precarious endeavor at best. At worst, it has
been a disaster of its own making.
The field of weather forecasting has
been riddled with skepticism since its
inception. One could even think back to
mythology where the town codger—loon
or prophet?—would foreshadow impend-
Rarely is falling below expectations a good thing, preferable even, but that is exactly how the 2013 catastrophe season panned out. What could have been a horrific year of natural disasters, reminiscent of the ferocious winds, waves
and fires the year prior, fizzled out, providing insurers
with a reprieve from major hurricane activity.
activity in 2013, causing
nearly 90% of insured
catastrophe losses in
the United States.