Expensive Losses in United States
Significant weather-related losses also occurred in the United States in 2011 after one of the worst tornado seasons on record caused a combined insured loss of around USD20 billion. The La Niña event helped create the necessary conditions for tornado formation (warm/humid air and strong south winds near the surface, with colder air and strong westerly winds in the upper atmosphere). A very strong jet stream also contributed to the favorable conditions. If considered a single event, the tornado losses in the second quarter would have ranked as the fourth most expensive disaster in U.S. history, according to the Insurance Information Institute.
The 2011 tornado season in the United States broke several records after two massive tornado outbreaks caused widespread damage in the United States in April and May. The first occurred between April 22 and April 28, damaging thousands of buildings in southern regions. Alabama was badly hit by the outbreak, with insurable damage in the cities of Birmingham and Tuscaloosa, alone, in the billions of dollars. The Property Claims Services (PCS) has estimated an insured loss of around USD7.3 billion for the entire outbreak (1) , making it the most expensive tornado event in U.S. history.
Another devastating tornado outbreak hit the United States between May 20 and May 27. Missouri was particularly badly affected during this event, as a single EF-5 tornado flattened parts of Joplin City. Overall, this tornado outbreak is estimated to have caused an insured loss of USD6.5 billion (2) .
The United States also experienced its first landfalling hurricane in three years in 2011 when Hurricane Irene came ashore along the Outer Banks of North Carolina as a category 1 hurricane in late August. Irene made three landfalls in total, also clipping New Jersey and New York as a tropical storm. Irene’s impact was felt across much of the U.S. east coast, affecting around 65 million people in ten states. However, wind damage was limited due to the storm’s weakened state as it moved up the east coast. Widespread flooding occurred but much of the flood-related damage was covered by the government-backed National Flood Insurance Program rather than private (re)insurers.
According to the PCS, Hurricane Irene caused insured losses of around USD4.3 billion in the United States. When combined with the high tornado losses sustained in April and May, the PCS said insured losses in the United States exceeded USD30 billion in the first nine months of 2011. This compares with losses of USD14.3 billion in 2010 and even exceeds those incurred in 2008 when hurricanes Gustav and Ike came ashore in Louisiana and Texas (see Figure 4). Irene also caused significant damage as it moved through the Caribbean. Parts of the Bahamas were devastated by winds of up to 115 mph while Puerto Rico, the Dominican Republic, Turks and Caicos and other Caribbean territories were also hit. Estimates suggest Irene caused insured losses of up to USD500 million in the Caribbean.
Hurricane Irene aside, significant insured losses from global tropical cyclones were limited in 2011. This was despite the 2011 Atlantic hurricane season experiencing another year of above-average activity. Activity in the West Pacific was below-average for the second consecutive year. However, five landfalling storms caused notable damage across the basin.
2011 Atlantic Hurricane Season
The 2011 Atlantic hurricane season produced a total of 19 named storms, well above the average and representing the joint-third highest total since records began in 1851 (tied with 1887, 1995 and 2010). However, the 2011 season was notable for how few storms strengthened into hurricanes. Only seven hurricanes and three major hurricanes formed in 2011, close to the long term average but well down compared to 2010 when twelve hurricanes and five major hurricanes developed. Only eight seasons on record had a lower percentage of hurricane development. For the hurricanes that did develop, favorable steering currents mostly kept the storms out at sea. 2011 marks the sixth straight year without a major hurricane making landfall in the United States.
Forecasters, including the Colorado State University (CSU), WSI Corporation (WSI) and the National Oceanic and Atmospheric Administration (NOAA), correctly predicted above-average named storm activity in the Atlantic basin but generally overestimated the number of hurricanes (see Table 1). Some forecasters also overestimated the expected number of landfalling hurricanes in the United States.
2011 Typhoon Season
There was once again uneven activity across the tropical cyclone basins in 2011. Activity in the West Pacific was below-average for the second year running, with only 22 named storms developing and 10 becoming typhoons (this compares to a long term average of 27 named storms and 17 typhoons). However, five storms (Ma-On, Nanmadol, Talas, Roke and Nesat) caused damage in the Philippines, Taiwan and Japan and each are estimated to have caused insured losses of more than USD100 million. Tropical Storm Talas and Typhoon Roke caused damage in Japan (with estimated insured losses of between USD150 million and USD600 million for both storms), while Typhoon Nanmadol pounded Taiwan and the Philippines (causing an estimated insured loss of up to USD700 million).
Outlook for 2012
Predictions that the La Niña event is likely to persist into 2012, albeit in a weakened state, could again influence worldwide natural hazards next year. Tropical cyclone activity is generally increased in the Atlantic basin and reduced in the Pacific during a La Niña event (early forecasts suggest the 2012 hurricane season could once again see above average activity).
Furthermore, as witnessed in 2011, La Niña events can cause abnormally heavy monsoons in Southeast Asia and Eastern Australia and fuel tropical cyclone development during the Australia cyclone season. Heavy rainfall and flooding have also hit Southern Africa and Central America during previous La Niña events, while prolonged dry periods have occurred in Central Africa and Northern Mexico. In the United States, La Niña’s potential impact includes above-average precipitation in the Pacific Northwest, Northern Rockies and Ohio Valley and below-average precipitation in the south-central and southeastern states.
The historical losses of 2011 once again reinforced the uncertainty associated with catastrophes. Despite a relatively benign hurricane loss season, increasing event severity and frequency elsewhere meant (re)insurers suffered the second most expensive year for catastrophe losses ever. The losses of 2011 will undoubtedly affect the January 1, 2012 reinsurance renewal and future loss activity will continue to play an important role in determining the direction of the reinsurance market.
 PCS Catastrophe Bulletin Serial No. 48
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Expensive Losses in United States