In terms of the metrics used to measure storm activity, the entire Northern Hemisphere is considered below normal. The Northern Hemisphere Accumulated Cyclone Energy (ACE) is only 21% of normal. Not a single named storm has occurred in the East Pacific, which is now close to a record late start, and there has been only one typhoon in the Northwest Pacific so far this year. The Atlantic remains quiet despite predictions of hyperactivity, yet the insurance industry is on edge as we complete the first full month of the Atlantic Hurricane season. As we mentioned in our last BMS Tropical Update issued at the end of May, the season would likely awaken with its first named storm around the middle of June, which occurred with the formation of tropical storm Alberto. Alberto was the latest 1st Atlantic named storm formation since the 2014 Atlantic Hurricane Season, yet one day ahead of the long-term average of the expected first named storm formation of June 20th. It formed just before landfall in the Gulf of Mexico on June 19th and lasted a total of 1.25 days as a weak, short-lived named tropical storm. So far, the National Hurricane Center has tracked four areas of possible tropical development this season in the Atlantic basin. Still, Alberto was the only area to manage named storm status.
Although Alberto made landfall about 250 miles south of the Texas-Mexican border, its impacts were far-reaching. Flooding was the main hazard over southern coastal Texas due to a combination of rainfall and minor storm surges as a result of Alberto's large wind field. This large wind field led to a storm surge along the Texas coastline that peaked at 1 to 3 feet, showing once again that even weak tropical storms can have far-reaching effects beyond just the landfall areas. The rainfall was beneficial to the region, which was enduring some drought conditions, with areas like Corpus Christi, Texas, experiencing up to 6" of rain; as Alberto moved inland, its remnants brought a large amount of moisture into the desert southwest, where it actually created widespread flash flooding in areas like southern Utah.
Overall, insurance losses from Alberto will likely be limited to the $25M to $75M range. Since most structures are elevated along the coastline, flood-related losses should also be limited. Across the South Texas coastline, the NFIP take-up rates are below 25%, with some counties having a take-up rate below 5%. Overall, NFIP losses should be limited, but there are likely still some uninsured losses, highlighting once again the protection gap.
Bullish Seasonal Forecast Continue
The average from the various forecast institutions (tracking 20 different seasonal forecasts) is for 24 named storms, 11 hurricanes, and 5 major hurricanes and an ACE index of 207. However, since 1966 (the beginning of the satellite era), June typically has, on average, 1.0 tropical storm formations in the NATL basin per season. The fact that we have not had a hurricane yet should not be a surprise, as hurricanes only develop every 6.4 years in the month of June. According to 30-year climatology, the first hurricane typically does not occur until August 11th. Only one major hurricane has been recorded during the past 58 years in the month of June, so that is rare. Bottom line: We have a long way to go, and yes, this year is still on pace with the very active season of 2005, which saw 28 named storms in total, but only 1 June named storm.
Another way of looking at the possible number of storms by a given date is by using the burndown chart that Sam Lillo, a senior software engineer at DTNWeather, which shows by July 1st, the maximum number of storms a season has had is 26, with 10% or less of the most season having under 19 named storms.
As we have pointed out in previous BMS Tropical updates, early season forecasts and early season activity, really have no skill, and their implications on the seasonal outlook for exceptional activity is limited, as there is a negligible correlation between early season and total activity. Overall, activity really does not pick up in the basin until August 15th, with the peak of the season occurring around September 10th.
Plenty of climate factors suggest the season will be active. A developing La Nina in the Central Pacific is still on track to provide less wind shear over the Caribbean and the Main Development Region. The water in the Atlantic Ocean is still warm. Still, in many areas, it has stabilized or even cooled to normal levels, like the Gulf of Mexico, which was primarily a result of the recent disturbances and tropical storm Alberto, so that might be a bit of good news in the near term.
The other climate forcer that needs to be watched is how much dry air might be around tropical waves. Just last week, off the southeast coast of the U.S., there was a robust surface circulation, but dry air in the middle layers of the atmosphere limited any tropical convection, so the NHC could not classify this area as a named storm. Currently, there is plenty of dusty, dry air across the Atlantic Ocean. In fact, some of this dust will be making its way to the Caribbean and the U.S., making for some spectacular sunsets in the next 10 days.
Lastly, interseasonal forcing, such as the Madden Julian Oscillation, a fluctuation that moves across the tropics and can enhance tropical convection every 30 to 60 days, is fairly weak. It has moved over Africa, which has sparked several tropical waves that are moving across the Main Development Region. Still, wind shear and dry air are two hostile factors for enhancing development; however, these are the seeds of possible future named storm activity later in the second week of July.
Expected Seasonal Tracks Heading into July and August.
The insurance industry should focus more on where storms might track during a given season compared to the overall number of named storms. So far, the season has provided some guidance on possible tracks. In the short term, the National Hurricane Center added two another areas to watch in its tropical outlook. The first areas north of South America is a robust tropical wave is racing across the Southern Caribbean below a belt of strong upper-level wind shear and dry Saharan air. Models are not terribly bullish, but perhaps a narrow window for development (20% chance) near the Yucatán this weekend would take the system on a similar track as Alberto. Beyond this current activity, the NHC is watching over the next seven days. The next area to watch will be a tropical wave near the Greater Antilles in the 8 – 10-day time frame, which some models are suggesting will be a tropical storm or hurricane and could track up between Florida and Bermuda by July 8th or so. Otherwise, no hyperactivity is expected over the next 15 days.
Regarding seasonal potential U.S. hurricane strikes, there is definitely an enhanced probability of such occurrences this season due to increased overall expected activity projections and the La Nina being weaker or neutral, which would be favorable for more landfalls. In looking at the latest SST forecast and the years that best match the forecasted analog, the following years of 1970, 1999, 2007, 2010, and 2011 show the insurance industry on possible expected tracks, which display a cluster of tracks similar to what we have seen with Alberto. In fact, the hurricane center is currently tracking across the southern Caribbean which closely match storm tracks of 2007. The other areas of interest are the clusters of activity east of Florida into the Bahamas up the east coast and a cluster of activity south of Bermuda.
When examining the climate model accumulated precipitation anomaly, it is evident there are similar areas of enhanced precipitation, which often come from tropical disturbances during this time frame. So, at this time, the season looks active. Still, record-breaking activity is getting harder and harder to come by, given the lack of early season activity as we head into the middle of July with very little new named storm activity. However the tropical wave that will be near the Greater Antilles 8 to 10 days from now needs to be watched, with the remainder of July being quite it seem at this time. As August starts, there could be better overall conditions across the basin with a focus on storms near Bermuda, Central America, or the East Coast of the U.S.
Lastly, remember that no news here is good news. We will provide timely updates as needed, focusing on the insurance industry, with the intent to add value our colleagues and clients will not find anywhere else.