The beginning of the 2012 hurricane season is upon us. It’s too soon to tell whether the winds will blow, but one thing is certain: Nothing will prevent a land-falling hurricane. For the past 15 years or so, seasonal forecasts have consistently indicated above-average storm formation. As PCS sees it, the more storms that form in the Atlantic Basin, the greater the odds of one or more striking land somewhere in the United States. But the ratio of named storms to storms making landfall varies from year to year.
In 2005, for example, there were 27 named Atlantic storms, and 15 became hurricanes. Seven storms — or 26 percent of the named storms — made landfall in the United States. Insurers paid a total of $58 billion for insured property damage that resulted.
Last year, there were 19 named Atlantic storms, including 7 hurricanes. But despite the large number of tropical systems, only 3 — or 16 percent of the named storms — made landfall in the United States.
Of those, only Hurricane Irene and Tropical Storm Lee caused significant damage. They both produced large rainfall totals across numerous states. PCS identified 13 states and the District of Columbia with insured losses from Hurricane Irene. Nine states and the District of Columbia reported losses associated with Tropical Storm Lee. Together, they caused an estimated insured loss of $4.8 billion. But it could have been worse.
Though it started out with the potential to be the “big one” that many fear, Irene barely carried hurricane status when it made landfall in North Carolina. By the time it reached the densely populated northeastern United States, it was at tropical storm strength or less. But with its path across Long Island and through New England, Irene reminded many observers of the Great Hurricane of 1938.
The 1938 storm caused serious economic damage to more than 93,000 families and generated around $300 million in economic losses, although insured losses were below $20 million. (Keep in mind that there was no significant central data collection effort at the time.) In today’s dollars, the value of the insured loss would be $1.6 billion. Those statistics illustrate the potential damage a hurricane of similar strength could cause today, especially with a larger and denser population along that route.
If Irene had been a Category 3 hurricane when it reached the Northeast, the damage could have surpassed $100 billion, and the industry might have experienced as many as 10 million claims. As it was, PCS estimated the insured property loss from Hurricane Irene at $4.3 billion, with 855,000 claims.
Since 1950, PCS has identified 1,628 catastrophes. Of those, only 89 — or approximately 5 percent —were hurricanes. The estimated insured loss from the hurricanes, however, comprised 40 percent of the entire losses from all catastrophes in the period — $141 billion in insured hurricane losses out of more than $360 billion in insured losses from all catastrophes.
Hurricane season forecasts for 2012 are down from previous years. Experts are calling for 10 to 14 named storms, with 4 to 7 of them expected to become hurricanes. Two or 3 are likely to develop into major hurricanes. Of course, those forecasts may change as we launch into the traditional start of hurricane season.
Keep in mind, however, that the number of storms doesn't necessarily correlate with the severity of the losses. Remember 1992? Hurricane Andrew was the first of only six hurricanes that year, but it resulted in insured losses of $15.5 billion. Andrew was the insurance industry’s costliest catastrophe — and perhaps the worst in terms of overall economic damage — until Hurricanes Katrina, Rita, and Wilma struck in 2005. Katrina alone generated $41.1 billion in insured losses and became the largest catastrophic event in the industry’s history.