Hurricane season raises more questions than answers: Moody’s

The 2024 Atlantic hurricane season has offered almost unending surprises and should provide seasonal forecasters with a windstorm’s worth of learnings. But the real lesson of 2024 might be that no matter how much those seasonal forecasters learn, it won’t be enough to truly protect a property portfolio. 

That is the knowledge that officials from catastrophe modelling firm Moody’s would like to impress upon reinsurers and cedants hammering out the impact that storms Debby–Francine–Helene–Milton could have on property-catastrophe treaty trends. 

“This shows the complexity of the matter,” Laurent Marescot, a senior director for insurance solutions at Moody’s, told Baden-Baden Today.

A season which had early been forecast to go “extremely active”—including the most severe June forecast ever from the National Oceanic and Atmospheric Administration—actually delivered below-average activity through the season peak. That said, just about everything that did form struck US soil. 

When the anticipated big storms did finally arrive, the season’s two biggest events hit adjacent pieces of property starting nearly three weeks after the season peak and inside of two weeks of one another.

Marescot cited a long list of seasonal forecast drivers that may have combined with the impact of the more well-known drivers of a bad hurricane season including the El Niño–Southern Oscillation, a recurring climate pattern involving changes in the temperature of waters in the central and eastern tropical Pacific Ocean, and Atlantic sea surface temperatures.

“Some are pretty remote,” he said, noting unusually stable tropospheric conditions and a northward shift in African monsoon patterns that gave the season its unexpectedly slow start.

Then came Helene and Milton, weeks after the traditional peak of the season. Marescot stresses that even a perfect seasonal forecast shows the challenges and shortcomings in protecting a property portfolio.

Moody’s has most recently put the combined loss tally on hurricanes Helene and Milton at $35 billion, almost certain to top the 2024 nat cat loss lists.

“It’s the complexity of having two events hitting one after the other in the same region,” Marescot said. “This is a major complexity on the modelling side and on the insurance side.”

The industry will certainly suffer complex combined losses between the two events as Helene, striking on Florida’s Big Bend, had the breadth and the supportive conditions to render record flood surge in the Tri-City area, nearly 200 miles to the south. This was also where Milton would bring renewed storm surge and hurricane winds only days later. Some degree of non-covered flood losses could be covered under the wind insurance policy.

“You have to have all the perils together in a correlated way.”

With storm surge, wind and heavy precipitation from separate storms intertwined, Marescot sees event attribution problems, including blurred lines across the chief perils and events. Claims spanning both events are likely to bring a single payout, but questions of attribution could impact reinsurance recoveries.

“You have to have all the perils together in a correlated way,” Marescot said. “You get in trouble if you miss one.” You can have an outlook on storm surge, precipitation and river flooding see a correlation, but it still might not be easy to understand the true exposure.

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