Time to be an alarmist
There is no need to provide a tropical update that caters to the alarmist, but this might be one of those times that warrants extra attention from the insurance and reinsurance world. The current forecast for Tropical Storm Milton is the exact Gray Swan event that has been playing in the minds of the insurance industry for decades.
Yesterday, mid-morning, Tropical Storm Milton was classified in the Bay of Campeche, as a hotspot for tropical cyclone genesis this season. Alberto, Chris, and Francine all formed in the same general area, and now Tropical Storm Milton will take an unusual track east out of this development zone towards Florida. In fact, Milton's path is very rare, as it is only the third storm to take this direction since 1850. Most storms travel into Mexico or Texas from this genesis location. The only two storms to do this prior were Hurricane 8 in 1859 and an unnamed hurricane of 1867. This historical context of storms underscores the gravity of the situation and the need for preparedness in the insurance and reinsurance industry, as this is a worst-case scenario as a storm coming directly from the west into the Florida West coast.
Track Forecast:
Like with many of the storm systems this year, the overall track agreement for Tropical Storm Milton remains reasonably tight. However, it is crucial to note that the NHC cone of uncertainty has an approximately 150-mile error in a four-day forecast. At this time, the uncertainty is low, with the expected landfall location from Ceder Key, FL, to Fort Myers, FL. The track guidance suggests the storm will pass very close to the Tampa Bay / St. Petersburg area, likely midday or early Wednesday evening. This is a densely populated region, and the potential impact on this area is significant, as a hurricane or major hurricane passing over such areas has not occurred since the Unnamed Oct 1946 hurricane, and the last major hurricane was the Oct 1921 Tampa Bay / Tarpon Spring Hurricane.
Intensity Forecast:
Intensity is the real question in the forecast. As NHC notes in their discussion this morning, there are many complexities. To quote them, “the intensity guidance continues to show a significant spread in the forecast peak intensity in 60-72 h, with possibilities ranging from category 1 to category 5 strength.” This significant spread in the intensity forecast underscores the need for caution and flexibility in the insurance and reinsurance industry's response. This is not very helpful given the magnitude of any hurricane taking a track directly into Tampa areas. Consequently, it remains too early to talk about specific impacts, but there are some very big eye-opening scenarios from various forecast models. The problem is an approaching cold front from a mid-latitude trough of low pressure that will steer the storm east. This could allow the storm to be in an ideal upper-level dynamic environment, resulting in some venting aloft in what appears to be a low wind shear environment. This is similar to the forecast situation for Helene, who was on its way to the Big Bend Region of Florida. Later in the forecast, as Milton intensifies, there is potential that shear could increase and that dry air could also come into the circulation, which would choke off intensification. At this time, this is likely a multi-billion-dollar question. This is why the National Hurricane Center is in the middle of the forecast model guidance. It would appear that if Milton takes a more north track, it will be stronger upon landfall on the West Coast of Florida. Whereas a track towards Naples, FL would be a weaker intensity. There is also a question as to when Milton will undergo an extratropical transition, which is similar to what occurred with Wilma on its path toward South Florida in 2005. Right now, there appears to be a slight model trend south with the forecast solution, but there will be back and forth with the computer models over the next 48 hours.
One downside of Hurricane Helene's rapid movement across the Gulf of Mexico is that it did not leave a lasting cold wake, as hurricanes typically do. While it did cool the waters slightly, they were initially very warm, and now they remain warmer than usual, with much of the Gulf still experiencing above-average sea surface temperatures. The loop current remains prominent, and the waters off the shelf south of Tampa are particularly warm. This leaves plenty of potential fuel for a system to strengthen, provided the wind shear is low enough to allow a core, like Milton, to develop and feed off these warm waters.
Another prominent question we do not know yet, is the overall size Milton will become. Right now, Milton has what appears to be a small compact center. Milton has the entire Gulf of Mexico to change its shape and size. The bigger the size, the bigger the problem, especially for storm surge along the west coast of Florida, which Helene just showed us could be a very big problem event without a landfalling hurricane.
So what does that all mean?
Based on current forecasts, this seems to be a classic Gray Swan event that the insurance industry has studied for decades. A major hurricane striking the Tampa Bay area has long been one of the industry's greatest concerns. While catastrophic models provide some guidance, it is important to remember that the region has not experienced hurricane-force winds of 85 mph or more in decades. Also, the insurance industry hasn't ever had an event to impact such a large populated area in decades. Although there is uncertainty around the storm’s intensity, one thing is clear: a hurricane is heading toward an area with a significantly increased population. The population of the Tampa Bay area and the Sarasota-Bradenton area combined in 1946 was about 450,000. Today, it is about 4.1 million. In other words, there are far more people at risk today. Most people have no idea what a direct hit from an intense hurricane can bring locally. The area is already recovering from Helene’s storm surge. Most of these areas that have been impacted have miles of trash piled up along the streets already. Think about this: when the water rises, all that trash gets pushed around by flood waters. Given the forecast, the storm surge will likely be worse than Helene. Now is not the time to clean up from Helene; now is the time to prepare for a potentially devastating storm.
While it is still too early to determine the exact track or intensity, a hurricane moving across the Gulf from the west presents a worst-case scenario for the region. If it makes landfall at or just north of the mouth of Tampa Bay, the impact could be significant. In 1921, a borderline Category 3 hurricane struck Tarpon Springs, driving a 10-15 foot storm surge into Tampa Bay. It is important to remember that the strongest surge and winds occur to the right of the storm's center. Tampa Bay is one of the most hurricane-vulnerable cities in the U.S. due to its large waterfront population, valuable property, and a bay that acts as a funnel for storm surge. A worst-case scenario would involve a landfall just north of the Bay’s mouth, where the storm’s circulation would push water into every inlet and corner. According to current forecasts, if Milton produces a 10-foot storm surge, it could flood parts of Tampa Airport, Downtown Tampa, Pinellas Park, and Clearwater.
If a Category 3 storm tracks just a few miles south, it would spare the Bay but flood Longboat Key instead. The bottom line is that there are no favorable outcomes if a Category 3 storm makes landfall, which is likely, though it could be either weaker or stronger. This is why it's too early to dive into the details of impact. The good news is the forecast is shifting south so this Gray Swan event might not occur.
Given the storm's rapid expected pace, strong winds will likely sweep across the I-4 corridor and deposit hurricane-force winds across the Orlando area to the East Coast. If Milton adopts this ideal worst-case scenario, the development along the I-4 corridor will only increase the cost to the insurance industry.
As with any named storm, there will be an unpredictable element that we cannot yet foresee. In this forecast, even a slight shift in the storm’s track or intensity could significantly affect the overall storm surge and the extent of wind damage inland.
In the coming days, we will be able to refine the details of the storm's impacts, including wind, rain, and storm surge, as well as assess how catastrophe risk models might perform.
It appears likely that Milton will be the fifth landfalling hurricane on the US mainland in the 2024 Atlantic Hurricane season. This would place this season in a tie with 2005, 2004, and 1893 as the second-most on record, dating to 1851. Only 2020, 1985, and 1886 have experienced more than six landfalling hurricanes