Michelle Harnick, Managing Director
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We’ve had a fairly quiet catastrophe year, making it easy for risk managers to slip into a false sense of comfort. But, the situation could have been much different, especially if Hurricane Bill had taken a slightly altered course. A single storm can affect the insurance industry profoundly, especially if it makes landfall where there is a high accumulation of risk. When the unexpected begins to take shape, the range of options available to risk bearers shrinks rapidly, and even the most thorough of plans can be thwarted. Any measure that can help carriers protect their capital as a storm is bearing down on its insureds can have an impact all the way to market capitalization.

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Hurricane Bill is currently located approximately 810 miles (1,305 kilometers) east of the Leeward Islands and packs sustained winds of around 100 mph (160 kmph), according to the National Hurricane Center (NHC). Bill is travelling in a west-northwest direction and this motion is expected to continue for the next day or so with a gradual turn to the northwest later this week. The NHC said hurricane-force winds extend 30 miles (45 kilometers) from the centre of the storm while tropical storm-force winds extend 150 miles (240 kilometers).

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Hurricane Bill is currently located approximately 1,160 miles (1,870 kilometers) east of the Lesser Antilles and packs sustained winds of around 75 mph (120 kmph), according to the National Hurricane Center (NHC). Bill is travelling in a west-northwest direction and this motion is expected to continue over the next 48 hours as the storm tracks over the central Atlantic Ocean. The NHC said hurricane-force winds extend 30 miles (45 kilometers) from the centre of the storm while tropical storm-force winds extend 145 miles (230 kilometers).

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Michelle Harnick, Managing Director
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The Guy Carpenter Hurricane Index helps (re)insurers assess the potential losses from hurricanes making landfall in the Atlantic Basin by defined regions: Northeast, Southeast, Florida, and Gulf. Guy Carpenter created this index in response to the (re)insurance industry’s questions about the credibility of catastrophe models after the 2004 and 2005 hurricane seasons and their need to better understand and manage their catastrophe risk. Unlike most indices, which do not differentiate by location and only take into account frequency or severity and historical climatologic information, the Guy Carpenter Hurricane Index also considers current meteorological information and forecasts about live events, the forecast landfall location, and the forecast landfall probability and the conditional severity.

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Michelle Harnick, Managing Director
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A hurricane is headed toward a coastal urban center, bringing with it the likelihood of outsized insured losses. The storm is heading into Galveston, Texas. The risk manager, tracking the situation, is concerned that the storm could strike a heavily exposed region. At this point, one of three situations could occur: (1) the storm does not make landfall, (2) the storm does make landfall, causing much more damage than expected, or (3) the storm makes landfall, but the risk manager has laid off some of the risk using livecat cover. 

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Michelle Harnick, Managing Director
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September 2008 brought two major shocks to the global (re)insurance industry. The financial catastrophe captured the headlines, ultimately depleting reinsurer capital by 18 percent, as measured by the Guy Carpenter Global Reinsurance Composite. At the same time, Hurricane Ike pushed through the Gulf of Mexico eventually costing carriers USD11.5 billion. These two events have left the industry in a capital-constrained environment. While last year’s surplus provided a sufficient cushion for absorbing the blows, the days of abundant capital are gone for the foreseeable future.

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Michelle Harnick, Managing Director
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The 2009 hurricane season is expected to be moderate, but that’s no reason to let your defenses down. In setting your expectations for the coming months, it pays to consider severity as well as frequency. Most major forecasts address the number of storms anticipated — but they don’t account for severity. A mild Atlantic hurricane season could still trigger outsized insured losses, and an exposed (re)insurer could feel the shocks on its bottom line, return on equity (ROE) ratio, and even market capitalization.

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GC LiveCat and GC ForeCat help you assess the impact of Atlantic hurricane activity—and potential losses—on your U.S. risk portfolio. With deeper detail, Guy Carpenter’s clients now have access to improved risk management capabilities, enabling them to manage their reinsurance purchases more effectively. GC ForeCat offers a detailed monthly pre-season hurricane landfall rate forecast from December through April, for four defined regions along the Atlantic Hurricane Basin, prior to the upcoming hurricane season. GC LiveCat delivers a forecast of 10 days—updated every twelve hours—for named storms in the Atlantic Hurricane Basin, along with probabilities of landfall by gate.

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