Do More Hurricanes Mean Higher Insurance Losses?

Do More Hurricanes Mean Higher Insurance Losses?

According to an article in Business Insurance, the Atlantic hurricane season is predicted to be highly active, with National Oceanic and Atmospheric Administration (NOAA) forecasting up to seven major hurricanes and up to 25 named storms. Often, hurricanes mean higher insurance losses, but the extent of these losses will largely depend on where the storms make landfall.

Colorado State University forecasts 23 named storms, including 11 hurricanes and five major hurricanes, marking their highest prediction on record. The heightened activity is attributed to record sea surface temperatures, a transition from El Niño to La Niña weather conditions, and reduced wind shear and trade winds.

In the article, Steve Bowen from Gallagher Re notes that La Niña years typically see more U.S. landfalls, historically resulting in 50 U.S. hurricane landfalls during 28 La Niña episodes compared to 15 during 20 El Niño episodes. Despite high activity, insured losses depend on landfall locations. 

In 2020, there were low insured losses despite a record number of landfalls because storms avoided highly populated areas. However, a single major hurricane hitting a densely populated area could result in up to $100 billion in losses.

For example, Hurricane Idalia in 2023 resulted in low insured losses due to its landfall in a sparsely populated region. On the other hand, Hurricane Ian in 2022 caused approximately $50 billion in insured losses after hitting a densely populated area in southwest Florida.

The ongoing migration to coastal areas is increasing potential losses, with significant insured losses seen between 2017 and 2023 due to hurricanes. As more people move to high-risk coastal areas, the likelihood and cost of hurricane-related claims are expected to rise.