Atlantic Basin, US and Caribbean Landfall Activity Rates over the 2006-2010 Period

Hurricane activity in the Atlantic basin has shown a marked increase since 1995, particularly evident in the number of Cat 3-5 storms. This increase is generally considered to be a result of multi-decadal scale variations in conditions that affect hurricane development, principally driven by increases in sea surface temperature (SST). Scientific views are emerging that these SST increases are being affected by climate change and may not revert back to the long-term pre-1990s averages.

For U.S. catastrophe risk, the concern is to understand landfall activities as well as the distribution of storms among different intensities at landfall. Prior to 2004, higher activity of the more intense storms in the basin did not convert into higher Cat 3-5 landfall activity, but the last 2 years have shown a significantly different behavior. Relevant questions for the insurance industry are: 1) is the activity observed over the last 11 years going to persist and for how long?, 2) particularly, are the last 2 years anomalous or a sign of future trends?, 3) what can be said about the activity of US landfall, particularly that of Cat 3-5 storms?, and 4) what best characterize the risk regionally in the US in the current conditions? Of particular interest to many business applications is to assess activity over a 3-5 period.

To provide answers to those questions from the financial risk perspective, we developed a research initiative across the various components of hurricane modeling, starting with an elicitation of expert opinions. Conclusions from this process, as well as the application of the expert consensus opinions to the regional assessment of US and Caribbean landfall activity and the study of the effect on US annual and aggregate losses are presented here.