The annual hurricane season begins today (June 1), with forecasts for more storm activity than in the years since Hurricane Katrina battered the Gulf Coast.
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Courtesy: FEMA
Since that storm in 2005, the costliest and fifth deadliest in U.S. history, property-casualty insurers have been collecting increased premiums during four calm hurricane seasons.
The calm could be ending this year, as forecasters say this hurricane season, which runs from June 1 through Nov. 30, could be among the worst in recent years.
Three forecasters predict four intense hurricanes in the Atlantic Basin, well above the long-term average of two to three intense storms. Warmer sea surface temperatures and a transition to neutral El Niño conditions are expected to enhance hurricane activity.
The National Oceanic and Atmospheric Administration (NOAA) predicts in its Atlantic Hurricane Season Outlook an 85% chance of an above normal season for the North Atlantic Ocean, Caribbean Sea and Gulf of Mexico, where hurricane activity could hamper recovery efforts in the Deepwater Horizon oil rig disaster.
NOAA predicts a 70% probability of between 14 and 23 named storms and eight to 14 hurricanes, with three to seven of them being major.
Forecasters say the conditions expected this year have historically produced some very active Atlantic hurricane seasons.
Industry bracing for impact
After significant catastrophe losses in first quarter, U.S. property-casualty insurers and global reinsurers are hoping their balance sheets don’t face further financial risks, according to A.M. Best, an insurance industry ratings service.
The industry enters the season on the strength of underwriting and financial results that rebounded in 2009 after deteriorating in 2008, a year marked by catastrophe losses from hurricanes Ike and Gustav and poor investment returns associated with the global financial turmoil, the ratings service said.
It added that state wind and beach plans, and last-resort insurers saw in-force liabilities grow by double and even triple-digit percentages from 2005 to 2009 in states such as North Carolina, Florida and Texas.
Insurance companies have reacted in the wake of the destruction left by Hurricane Katrina, which caused 1,836 confirmed deaths and more than $81.2 billion in losses.
The ratings service’s data indicates insurers’ efforts to exit hurricane prone states accelerated from 2005 to 2009, compared with homeowners’ multi-peril business written earlier in the decade.
Major writers of homeowners’ multiperil, Citizens Property Insurance Corporation in Florida and Louisiana Citizens Property Insurance Corp., have shifted market share to other carriers through takeout programs, the service reported.
The top 10 A.M. Best rated writers’ market share fell more than eight percentage points from 2005 to 2009 in Louisiana; about three percentage points in Mississippi; and more than nine percentage points in Texas.
Forecasts for hurricane season rivaling 2005 put insurers on edge via IFAwebnews .
