June 14th, 2010

2010 Hurricane Season Begins: Knowing, Understanding and Better Managing the Risks, Part III: 2010 Hurricane Forecast

Posted at 1:00 AM ET

Lara Mowery, Managing Director and Julian Alovisi, Senior Vice President
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To coincide with the start of the hurricane season, Guy Carpenter has summarized the various forecasters’ predictions for the 2010 season. Several meteorologists have released forecasts for the forthcoming hurricane season and there seems to be a general consensus that 2010 will see unusually high activity. If this prediction proves to be true, the 2010 hurricane season will stand in sharp contrast to the relatively quiet 2009 season.

To help (re)insurers prepare for the hurricane season, Guy Carpenter and WSI (Weather Services International) Inc. have developed a pre-season regional forecast of landfall rates for different regions in the United States (Gulf, Florida, Southeast and Northeast). According to the May GC ForeCatTM update, the Northeast region is most vulnerable to tropical cyclones coming ashore in the United States in 2010. The rate of 0.62 for the Northeast represents the mean number of landfalling tropical cyclones in that region for the 2010 season, more than double the 1951-2007 average landfall rate of 0.29. The landfall rate for Florida is also significantly above-average:

hurr1

Several other forecasters, including AccuWeather, the Colorado State University (CSU) and NOAA have issued Atlantic basin predictions for 2010 season. WSI have also released a basin-wide forecast. Their most recent predictions are outlined in the table below:

hurr2

When announcing its 2010 hurricane prediction, NOAA said the season “could be one of the more active on record” if the upper end of its predicted range (23 tropical storms, 14 hurricanes and 7 major hurricanes) is realized. NOAA said the intensity of the hurricane season will very much depend on whether current El Niño-neutral conditions persist or if there will be a transition to La Niña during the summer. El Niño, a phenomenon marked by a warming of sea surface temperatures (SSTs) in the
equatorial Pacific, tends to suppress the development of hurricanes (as demonstrated in 2009). Conversely, La Niña cools SSTs in the Pacific and typically enhances Atlantic basin activity. NOAA said conditions are becoming increasingly favorable for La Niña to develop during 2010.

In its May forecast, WSI said the 2010 Atlantic hurricane season could be the most active since the record breaking year of 2005. WSI, AccuWeather and the CSU say more than 16 storms could develop in 2010. To put that in perspective, AccuWeather said only eight years in the 160 years of records have had 16 or more storms in a season.

AccuWeather also warned that seven storms could impact the United States coastline during the forthcoming season, five as hurricanes and two or three as major hurricanes. The CSU, meanwhile, said there is a 76 percent probability of a major hurricane making landfall along the entire U.S. coastline, compared with an average of 52 percent. The U.S. East Coast has a 51 percent landfall probability, while there is also a 51 percent chance of a major hurricane hitting the Gulf Coast, the CSU added. The team also predicted a 65 percent chance of a major hurricane tracking through the Caribbean, compared with the long-term average of 42 percent.

All forecasters agree that the factors driving their above-average predictions include a rapidly weakening El Niño weather phenomenon (or even the possible emergence of La Niña) and warming SSTs. In fact, NOAA has observed that SSTs in the Atlantic are currently up to four degrees Fahrenheit above-average while WSI said SSTs are currently at record warm levels for May. WSI said such conditions have reaffirmed its view that the 2010 season “will at least approach the record 2005 levels of activity.”

Click here to read 2010 Hurricane Season Begins:  Knowing, Understanding and Better Managing the Risks, Part II:  Florida Hurricane Catastrophe Fund, Innovative Products  »

Click here for 2010 Hurricane Season Begins: Knowing, Understanding and Better Managing the Risks, Part I: State of the Florida Marketplace »

Click here to view additional materials on Hurricanes »

Click here to view additional materials on the Florida marketplace »

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* Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product. 

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