What is the El Niño Southern Oscillation? More conveniently known as ENSO, it is the planet’s largest source of natural climate variability on interannual time scales. ENSO describes the interaction between ocean and atmosphere in the equatorial Pacific, but the results of this interaction are global, and can last for many months. There is a good level of ENSO awareness in our industry, such as that warm phases of the oscillation (El Niño) tend to suppress Atlantic hurricane activity, and that cool phases (La Niña) tend to enhance it. But how was ENSO discovered? And how does it work?
The 2016-17 Australian region cyclone season will be remembered primarily as an exceptionally slow starter that eventually went on to produce a slightly below-average season in terms of activity.
With the official season running from November 1 to April 30 each year, an average of ten cyclones typically develop over Australian waters with around six making landfall, and on average, the first cyclone landfall is by December 25. For the 2016-17 season, we saw nine tropical cyclones, of which three further intensified into severe tropical cyclones and three of which made landfall, running contrary to an average to above-average forecast from the Bureau of Meteorology. Continue reading
Technology can be a powerful ally in the battle to successfully assess and manage risk. From new, high-definition models to fully hosted solutions that shrink costs and timeframes, risk professionals now have access to the tools they need to successfully manage their portfolios.
Advances both in the collection of data and computational strength have enabled more precise and comprehensive analytics than were previously possible, thus allowing a more complete and accurate risk profile.
The more you know about risk and exposure, the more they can be managed. Unmanaged or undermanaged, risks, and exposures can become problems and even turn tragic or fatal.
Global insured losses from catastrophes totaled $37 billion in 2015 according to Swiss Re’s most recent Sigma Study. The 2015 figure, at just over half the inflation-adjusted previous 10-year average of $62 billion in insured catastrophe losses, was substantially tied to a quiet Atlantic hurricane season.
“The relatively low level of losses was largely due to another benign hurricane season in the US. El Niño in 2015 contributed to weather patterns deviating from average climate norms,” said the Swiss Re report.
(Re)insurers’ financial results for the past two years have been dotted with the phrase “benign catastrophe losses,” demonstrating how they have benefitted from quiet Atlantic storm conditions producing below-average claims activity.
That period of below-average catastrophe losses for (re)insurers may be coming to an end as researchers and forecasters are pointing toward a more active Atlantic hurricane season for 2016.
When (not if) catastrophe losses do return to their 10-year average, that’s $25 billion across somebody’s balance sheet. What might the 2016 Atlantic hurricane season hold for the U.S. and those who insure it?
With ports lining the U.S. coast from Texas to New York, even one landfall could wreak havoc on marine activities and infrastructure as the country moves into the winter holiday and heating oil seasons.
More Active Season?
While 2015 saw only 11 named storms with just four hurricanes, early indications suggest that the 2016 season will exceed those totals.
An April 14 update from the Climate Prediction Center of the National Oceanic and Atmospheric Administration (NOAA) said that the current El Nino conditions, known to inhibit hurricane activity, are likely to abate.
El Niño is dissipating and NOAA’s Climate Prediction Center is forecasting a 70 percent chance that La Niña—which favors more hurricane activity—will be present during the peak months of hurricane season, August through October.
“Nearly all models predict further weakening of El Niño, with a transition to ENSO-neutral likely during late spring or early summer 2016. Then, the chance of La Niña increases during the late summer or early fall,” the Center said in its update.
The Colorado State University Tropical Meteorology Project issued a forecast that included an estimated 12 named storms and five hurricanes, again greater than observed 2015 totals.
The Weather Company’s Professional Division issued a report stating the 2016 Atlantic Hurricane season would be he most active since 2012. This report forecasts 14 named storms, eight hurricanes, and three major hurricanes, more than the 30-year historical average of 12 named storms, six hurricanes, and three major hurricanes, according to The Weather Channel.
Most recently, NOAA followed its earlier report on El Nino with its annual Atlantic Hurricane Forecast, stating that this year’s hurricane season will see closer to Normal activity after three slow years.
“A near-normal prediction for this season suggests we could see more hurricane activity than we’ve seen in the last three years, which were below normal,” said Gerry Bell, Ph.D., lead seasonal hurricane forecaster with NOAA’s Climate Prediction Center.
The NOAA forecast predicts a 70% likelihood of 10 to 16 named storms, of which 4 to 8 could become hurricanes and 1 to 4 major hurricanes (Category 3, 4, or 5). In addition to a near-normal season being most likely with a 45% chance, there is also a 30% chance of an above-normal season and a 25% chance of a below-normal season.
Another ominous harbinger was the formation of tropical storm Colin on June 5—the earliest third storm on record in the Atlantic basin. Colin then made landfall on June 6 along Florida’s Big Bend with maximum sustained winds of 50 mph—the first named storm to make landfall in Florida since Andrea in 2013.
Earlier this year, Hurricane Alex became only the second hurricane on record to form in the month of January, sweeping through The Azores as a tropical storm.
Prepare for the Worst
The insurance sector has been substantially re-shaped since the last large catastrophe loss—by M&A, the influx of new capital—meaning new people, new relationships, even new claims procedures and personnel
It’s an entirely new landscape, entirely untested—how will it respond when a catastrophe hits and claims and losses mount?
From first responders to catastrophe modelers, one piece of advice never changes—be prepared.
That means understanding your exposures and accumulations and owning your own view of risk.
You can’t control or avoid catastrophes, but you can manage and mitigate their effects. Being prepared is the first step.
Sports fans around the world have witnessed impressive winning streaks throughout history. After capturing two consecutive UEFA European Championships (2008, 2012) and a World Cup championship (2010), the Spanish National Football Team entered the 2014 World Cup in Brazil as the top-ranked squad in international competition. The dominant Spaniards were among the international sportsbooks’ favorites to bring home the trophy once again.
Instead, surprising defeats at the hands of the Netherlands and Chile eliminated Spain at the group stage. Spain’s streak of dominance came to a sudden end, marking the earliest World Cup exit for a defending champion since 1950.
From a meteorological perspective, the United States is currently riding its own streak: ten Atlantic hurricane seasons without a major hurricane (category 3 or above) making landfall, the longest such stretch in recorded history. With another hurricane season upon us, many will be keeping a keen eye on the Atlantic this summer to see if this impressive streak will continue.
Global forecasting groups, such as Colorado State University and Tropical Storm Risk, have issued their tropical storm and hurricane activity forecasts for the 2016 Atlantic hurricane season. Christopher Allen of the RMS Event Response team has authored an excellent summary of their forecasts in the RMS 2016 North Atlantic Hurricane Season Outlook published this week on RMS.com.
You can also listen to my summary of the season’s forecasts during my talk to AM Best TV’s John Weber. In summary, most forecasts are predicting anywhere between near-average to above-average activity in the Atlantic basin, reflecting conflicting signals in the key indicators that influence hurricane formation.
Will we have increased hurricane activity?
One factor that may support increased hurricane activity this season is the anticipated state of the El Niño-Southern Oscillation, or ENSO. As reported on this blog several months ago, many ENSO forecasts project a transition out of last year’s historic El Niño phase into a La Niña phase, which is historically more favorable for hurricane development. Wind shear, detrimental to tropical cyclone formation, typically is reduced in the Atlantic basin during La Niña phases of ENSO.
Conversely, some forecasts predict a cooling of Atlantic sea surface temperatures (SSTs), which would oppose any support provided by a forecasted La Niña and reduce the potential for an active hurricane season. This cooling has been driven by a lengthened positive phase of the North Atlantic Oscillation (NAO), which causes stronger than normal trade winds in the tropical North Atlantic and upwelling of deeper cold ocean water near the surface.
The Atlantic Multidecadal Oscillation may also be transitioning into a prolonged phase detrimental to tropical cyclone development, a theory often mentioned on this blog, although one that is still debated in the scientific community.
If considered in isolation, La Niña conditions and cooling Atlantic SSTs exert conflicting influences on Atlantic tropical cyclone development. However, forecasts contain key caveats that will ultimately determine this season’s activity:
- Although a transition into a La Niña phase is widely anticipated, a late arrival would limit its ability to support development in the basin.
- Further, forecasts of Atlantic sea surface temperature during August and September, the peak of hurricane season, remain conflicted.
Does the season’s early storm activity signify more activity?
Forecasts predicting above-average basin activity are understandable, given the early activity observed prior to the season’s official start. Tropical Storms Bonnie and Colin both formed before the second week in June, bringing heavy rainfall to South Carolina and the Gulf coast of Florida, respectively. Bonnie and Colin followed Hurricane Alex, the first January hurricane since 1938.
Bonnie’s formation marked the first time since 2012 that two named storms developed before June 1, the official start of hurricane season. The 2012 season ended with 19 total named storms, the third-most on record, including Superstorm Sandy, which caused more than $18 billion in insured losses.
Would the industry be prepared for the next major hurricane landfall? According to Fitch, the answer is yes: insurers and reinsurers in 18 coastal U.S. states would be equipped to handle one major event this season, although this resiliency has not been recently tested. More worrying, though, are the prospects of a large tail event or even multiple landfalling events, which may be supported by the right combination of oceanic and atmospheric influences.
With the hurricane season now officially underway, we will watch, wait and see how the season’s activity unfolds over the next few months. What is certain, though, is that streaks are made to be broken. It’s just a matter of when.
It’s not often that you see an Atlantic hurricane making headlines in January. Subtropical Storm Alex was named by the National Hurricane Center on January 13, 2016 and strengthened into a hurricane one day later. Although Alex ultimately exhibited a short lifespan and caused minimal damage, the storm has the scientific and risk management communities talking about what it might mean for the 2016 hurricane season and the near-term state of the basin.
In October, we discussed the below-average rate of landfalling hurricanes in recent Atlantic seasons, the influence of the Atlantic Multidecadal Oscillation (AMO) on basin activity phase shifts, and how shifts are reflected within the RMS Medium Term Rates (MTR) methodology.
In response to recent quiet seasons, scientists hypothesized about a possible shift in Atlantic hurricane frequency, one that would end the observed active Atlantic hurricane regime that began around the mid-1990s. Central to these discussions was commentary published in the October 2015 edition of Nature Geosciences, suggesting that AMO is entering a negative phase detrimental to Atlantic cyclogenesis.
However, recent peer-reviewed research highlights how sensitive the historical record is to the precise definitions used for hurricane activity. An article soon to be published in the Bulletin of the American Meteorological Society argues that the definition of the recent “hurricane drought,” based on the number of U.S. major landfalling hurricanes, may be arbitrary. This research finds that small adjustments to intensity thresholds used to define the drought, as measured by maximum winds or minimum central pressure, would shorten the drought or eliminate it completely.
In its most recent annual review of the Atlantic basin, RMS recognized that the anticipated atmospheric conditions for the upcoming season present a unique challenge. The latest forecasts suggest that the influence of the El Niño-Southern Oscillation (ENSO), another key indicator of hurricane frequency, may oppose the influence of a negative AMO.
ENSO represents fluctuating ocean temperatures in the equatorial Pacific that influence global weather patterns. El Niño, or a warm phase of ENSO, is associated with increased Atlantic wind shear that historically inhibits tropical cyclone development in the basin. La Niña, or a cool phase of ENSO, is associated with decreased Atlantic wind shear that historically supports tropical cyclone development.
Illustrations of the three main phases of the El Niño-Southern Oscillation. Source: Reef Resilience
ENSO has played an important role in influencing tropical cyclone activity in recent Atlantic hurricane seasons, particularly in 2015. Last season, the basin experienced one of the strongest El Niño phases on record, which contributed to below-average activity and well-below normal Accumulated Cyclone Energy (ACE), an index quantifying total seasonal duration and intensity. .
Looking ahead, the latest ENSO forecasts predict a shift out of the current El Niño phase over the next few months towards a more neutral or even a La Niña phase. The extent to which these conditions impact hurricane activity for 2016 is still to be determined; however, these conditions historically support above average activity.
Mid-February 2016 observations and model forecasts of ENSO, based on the NINO3.4 index, through December 2016. Positive values correspond with El Niño, while negative values correspond with La Niña. Sharp shifts from El Niño to La Niña are not unprecedented: La Niña conditions quickly followed the very strong El Niño of 1997-98. Source: International Research Institute for Climate and Society
The concurrence of potential changes in both the AMO and ENSO represent a unique period for 2016:
- A negative AMO phase may act to suppress Atlantic hurricane activity in 2016.
- A neutral or La Niña ENSO phase may act to enhance Atlantic hurricane activity in 2016.
These signals also have a range of potential implications on the RMS MTR forecast. Thus, RMS will spend the upcoming months closely engaging both the scientific community and market regarding this unique state of the basin and its potential forward-looking implications on hurricane activity. Modelers will evaluate the influence and sensitivities of new data, new methods, and new science on the MTR forecast. During this time, RMS will communicate results and insights to the broader market across a variety of mediums, including at Exceedance in May.
This post was co-authored by Jeff Waters and Tom Sabbatelli.
The northwest Pacific is the most active tropical cyclone basin in the world, having produced some of the most intense and costly cyclone events on record. The 2015 typhoon season has been particularly active due to this year’s strong El Niño conditions.
The unpredictable nature of the El Niño phenomenon, which affects the genesis and pathway of tropical cyclones, and the complexity of tropical cyclone systems underscore the need to fully understand typhoon risk—particularly in Japan where exposure concentrations are high. Catastrophe models, such as the forthcoming RMS® Japan Typhoon Model, using a basin-wide event set to model the three key correlated perils—wind, inland and coastal flood—are more effective in enabling firms to price and manage the ever-evolving exposures that are at risk from this multifaceted peril.
The Significance of September
Peak typhoon season in the northwest Pacific basin is between July and October, but it’s September that typically sees the highest number of strong category 3-5 typhoons making landfall: eight of the top ten greatest insured losses from northwest Pacific tropical cyclones since 1980 all occurred in September.
In September, during El Niño years, Guam is significantly more susceptible to a higher proportion of landfalls, and Japan and Taiwan experience a slight increase due to the genesis and pathway of tropical cyclones. While wind is the primary driver of tropical cyclone loss in Japan, inland and coastal flooding also contribute substantially to the loss.
In September 1999, Typhoon Bart caused $3.5 billion in insured losses due to strong winds, heavy rainfall, and one of the highest storm surges on record at the time. The height of the storm surge reached 3.5 meters in Yatushiro Bay, western Japan, and destroyed coastal defences, inundating vast areas of land.
Five years later in September 2004, Typhoon Songda caused insured losses of $4.7 billion. Much of the loss was caused by rain-related events and flooding of more than 10,000 homes across South Korea and Japan in the Chugoku region, western Honshu.
Table 1 Top 10 Costliest Tropical Storms in Asia (1980-2014):
|Date||Event||Affected Area||Maximum Strength (SSHWS)||Insured Loss ($mn)|
|Sept, 1991||Mireille||Japan||Cat 4||6,000|
|Sept, 2004||Songda||Japan, South Korea||Cat 4||4,700|
|Sept, 1999||Bart||Japan, South Korea||Cat 5||3,500|
|Sept, 1998||Vicki||Japan, Philippines||Cat 2||1,600|
|Oct, 2004||Tokage||Japan||Cat 4||1,300|
|Sept 2011||Roke||Japan||Cat 4||1,200|
|Aug – Sept, 2004||Chaba||Japan, Russia||Cat 5||1,200|
|Sept, 2006||Shanshan||Japan, South Korea||Cat 4||1,200|
|Sept, 2000||Saomai||Japan, South Korea, Guam, Russia||Cat 5||1,100|
|Sept, 1993||Yancy||Japan||Cat 4||980|
September 2015 – A Costly Landfall for Japan?
This September we have already seen Tropical Storm Etau, which brought heavy rains to Aichi Prefecture on Honshu Island causing immense flooding to more than 16,000 buildings, and triggered dozens of landslides and mudslides.
The increased tropical cyclone activity in the northwest Pacific this year has been attributed to an El Niño event that is forecast to strengthen further. Two factors linked to El Niño events suggest that this September could still see a costly landfall in Japan:
- El Nino conditions drive the formation of tropical cyclones further eastward, increasing the travel times and distances of typhoons over water, giving rise to more intense events.
- More northward recurving of storms produces tropical cyclones that track towards Japan, increasing the number of typhoons that could make landfall.
Combined, the above conditions increase the number of strong typhoons that make landfall in Japan.
Damaging Typhoons Don’t Just Occur In September
Damaging typhoons don’t just occur in September or El Niño years – they can happen under any conditions.
Of the ten costliest events, only Typhoon Mireille in 1999 and Typhoons Songda, Chaba, and Tokage, all of which made landfall in 2004, occurred during El Niño years
Look out for more information on this topic in the RMS paper “Effects of the El Niño Southern Oscillation on Typhoon Landfalls in the Northwest Pacific”, due to be published in October.
Today the insurance industry gears up for the start of another hurricane season in the Atlantic Basin. Similar to 2014, most forecasting agencies predict that 2015 will yield at- or below-average hurricane activity, due largely in part to the anticipated development of a strong El Niño phase of the El Niño Southern Oscillation (ENSO).
Unlike 2014, which failed to see the El Niño signal that many models projected, scientists are more confident that this year’s ENSO forecast will not only verify, but could also be the strongest since 1997.
Earlier this month, the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center (CPC) reported weak to moderate El Niño conditions in the equatorial Pacific, signified by above-average sea surface temperatures both at and below the surface, as well as enhanced thunderstorm activity.
According to the CPC and the International Research Institute for Climate and Society, nearly all forecasting models predict El Niño conditions—tropical sea surface temperatures at least 0.5°C warmer than average—to persist and strengthen throughout 2015. In fact, the CPC estimates that there is approximately a 90% chance that El Niño will continue through the summer, and better than a 80% chance it will persist though calendar year 2015.
Model forecasts for El Niño/La Niña conditions in 2015. El Niño conditions occur when sea surface temperatures in the equatorial central Pacific are 0.5°C warmer than average. Source (IRI)
Not only is the confidence high for the tropical Pacific to reach El Niño levels in the coming months, several forecasting models predict possible record-setting El Niño conditions this fall. Since 1950, the record three-month ENSO value is 2.4°C, which occurred in October-December 1997.
Even if conditions verify to the average model projection, forecasts suggest at least a moderate El Niño event will take place this year, which could affect many parts of the globe via atmospheric and oceanic teleconnections.
Impacts of El Niño conditions on global rainfall patterns. Source (IRI)
In the Atlantic Basin, El Niño conditions tend to increase wind speeds throughout the upper levels of the atmosphere, which inhibit tropical cyclones from forming and maintaining a favorable structure for strengthening. It can also shift rainfall patterns, bringing wetter-than-average conditions to the Southern U.S., and drier-than-average conditions to parts of South America, Southeast Asia, and Australia.
Despite the high probability of occurrence, it’s worth noting that there is considerable uncertainty with modeling and forecasting ENSO. First, not all is understood about ENSO. The scientific community is still actively researching its trigger mechanisms, behavior, and frequencies. Second, there is limited historical and observational data with which to test and validate theories, hence the source of ongoing discussion amongst scientists. Lastly, even with ongoing model improvements, it remains a challenge for climate models to accurately capture the complex interactions of the ocean and atmosphere, leading to small initial errors that can amplify quickly in the long term.
Regardless of what materializes with El Niño in 2015, it is worth monitoring because its teleconnections could impact you.
When it rains in Sulawesi it blows a gale in Surrey, some 12,000 miles away? While these occurrences may sound distinct and uncorrelated, the wet weather in Indonesia is likely to have played some role in the persistent stormy weather experienced across northern Europe last winter.
Weather events are clearly connected in different parts of the world. The events of last winter are discussed in RMS’ 2013-2014 Winter Storms in Europe report, which provides an in-depth analysis of the main 2013-2014 winter storm events and why it is difficult to predict European windstorm hazard due to many factors, including the influence of distant climate anomalies from across the globe.
Can we predict seasonal windstorm activity during the 2014-2015 Europe winter windstorm season?
As we enter the 2014-2015 Europe winter windstorm season, (re)insurers are wondering what to expect.
Many consider current weather forecasting tools beyond a week to be as useful as the unique “weather forecasting stone” that I came across on a recent vacation.
I am not so cynical; while weather forecasting models may have missed storms in the past and the outputs of long-range forecasts still contain uncertainty, they have progressed significantly in recent years.
In addition, our understanding of climatic drivers that strongly influence our weather, such as the North Atlantic Oscillation (NAO), El Niño Southern Oscillation (ENSO), and the Quasi-Biennial Oscillation (QBO) is constantly improving. As we learn more about these phenomena, forecasts will improve, as will our ability to identify trends and likely outcomes.
What can we expect this season?
The Indian dipole is an oscillation in sea surface temperatures between the East and West Indian Ocean. It has trended positively since the beginning of the year to a neutral phase and is forecast to remain neutral into 2015. Indonesia is historically wet during a negative phase, so we are unlikely to observe the same pattern that was characteristic of winter 2013-2014.
Current forecasts indicate that we will observe a weak central El Niño this winter. Historically speaking this has led to colder winter temperatures over northern Europe, with a blocking system drawing cooler temperatures from the north and northeast.
The influence of ENSO on the jet stream is less well-defined but potentially indicates that storms will be steered along a more southerly track. Lastly, the QBO is currently in a strong easterly phase, which tends to weaken the polar vortex as well as westerlies over the Atlantic.
Big losses can occur during low-activity seasons
Climatic features like NAO, ENSO, and QBO are indicators of potential trends in activity. While they provide some insight, (re)insurers are unlikely to use them to inform their underwriting strategy.
And, knowing that a season may have low overall winter storm activity does not remove the risk of having a significant windstorm event. For example, Windstorm Klaus occurred during a period of low winter storm activity in 2009 and devastated large parts of southern Europe, causing $3.4 billion in insured losses.
Given this uncertainty around what could occur, catastrophe models remain the best tool available for the (re)insurance industry to evaluate risk and prepare for potential impacts. While they don’t aim to forecast exactly what will happen this winter, they help us understand potential worst-case scenarios, and inform appropriate strategies to manage the exposure.