RMS’ chief research officer Robert Muir-Wood reviews 2017, a year which will define the (re)insurance industry for years to come…
2017 was a record-breaking year for insured losses, due by and large to the North Atlantic hurricane season. Not since 2004 and 2005 had the U.S. witnessed so many landfalling hurricanes. Over a two-month period, starting from the second week of August, each of ten atmospheric circulations that started to form over the tropical Atlantic, from “Franklin” to “Ophelia,” turned into a hurricane. Never before has there been such an exemplary production line of hurricane generation.
Hurricane Harvey did not start breaking records until it was well past its prime. The circulation stalled for three days at the Texas coast close to the city of Houston. By stalling half onshore and half offshore, it could “refuel” and acquire moisture over the exceptionally warm western Gulf of Mexico. It then released this moisture out over greater Houston, where it proceeded to shatter the all-time records for three-day rainfall totals, both for Texas and for the whole US Since 1950, the trend has been for hurricanes to move more slowly…so perhaps it is not unexpected that a storm should stall right at the coast?
Hurricane intensity is strongly correlated with sea surface temperatures as well as the depth of the surface warm layer. To experience two Category 5 hurricanes, one of which broke records for wind speed and duration at peak intensity, requires some extraordinary sea surface warming beneath the path of these storms.
The notorious 1780 hurricane, which more or less levelled all buildings in Barbados, was clearly at the same top Category 5 intensity of Hurricane Irma when it passed over Barbuda or BVI. Such incredibly intense hurricanes have happened in this region in the past and it is suspected that they may be more frequent in the future. The buildings and people of Florida were extraordinarily fortunate that Irma had the stuffing knocked out of it when it passed over Cuba before making landfall on the Florida Keys.
Hurricanes Irma and Maria devastated the infrastructure of these Caribbean islands. A year on, Puerto Rico is only now completing the final electricity reconnections. On the island of Dominica they still have months of work before everyone is reconnected. Is the call to ‘build back better’ going to be matched with real change in what gets constructed? And then there were the wildfires in California, breaking records for the numbers of houses destroyed, the total cost and the area burnt (until that record was broken once again in 2018).
The Tubbs fire highlighted what RMS first modelled in 2004 – a wildfire dependent on vegetation fuel, blown out of control in the fierce winds, transformed into an urban conflagration in which the closely packed wooden buildings of northern Santa Rosa were the fuel. The fires reflected an intersection of a multi-year drought, millions of dead trees, thick vegetation after a previous wet winter, a record heatwave and an extended fire season: with an unmistakable signature of climate change. Each high catastrophe loss year is different, yet each are carefully considered in RMS product suite: the 2017 losses were almost all in the US, Mexico and Caribbean.
The last high loss year 2011 was almost all outside North America: in Japan, New Zealand and Thailand. The region with the highest growth in catastrophe insurance risk is Asia and RMS model releases in 2017 and 2018 highlight our commitment to modelling these new frontiers for the insurance market across the Philippines, South Korea and India. Finally, there are the catastrophe risks that have no geographic location: like the NotPetya contagious malware attack, the largest cyber insurance loss so far, for which RMS has released the first probabilistic cyber risk model.