Ida highlights how much work is yet to be done to fill insurance gaps
Specialty insurance in-demand, with intense craving for customisation: Aon
Hurricane Ida insured losses continue to mount, could hit $40bn
Dan Ward, Karen Clark & Company; Steve Bowen, Aon; Kamil Kluza, Climate X; John Dickson, Aon Edge
The re/insurance industry is facing another season of potentially heavy Atlantic hurricanes, with conditions pointing towards several large storms making landfall in the US following the devastation wrought by Hurricane Ida across Southern states.
Speaking at the Re/insurance Lounge, Intelligent Insurer’s online, on-demand platform for interviews and panel discussions with industry leaders, market participants ranging from brokers to carriers and risk modelling firms broadly agreed that the industry is likely to experience several large events this season.
“It would not surprise me if we continue to see a very active late part of the season because of these La Niña conditions.” Steve Bowen, Aon
Steve Bowen, managing director and head of catastrophe insight at Aon, said there is no question that the market is looking at another above-average season, adding that he would not be shocked to see the total surpass the 13 named storms experienced last year.
“Once again, atmospheric conditions continue to become more favourable for this type of development, and the ocean remains quite warm. We are also looking at a late-season transition to La Niña, which tends to mean more activity across the Atlantic Ocean as well,” he said.
“It would not surprise me if we continue to see a very active late part of the season because of these La Niña conditions—almost a repeat of last year, where we saw a surprising number of major hurricanes and storms develop in October and November. My guess is that it’s going to be another very active year.”
Dan Ward, senior meteorologist at catastrophe-modelling specialist Karen Clark & Company, agreed with Bowen’s assessment, saying that most of the activity is likely to be ahead of us—despite the already-significant damage of Hurricane Ida.
He said that the combination of above-average sea surface temperatures across the tropical Atlantic and weaker-than-average wind shear were clear indications that this season would see substantial activity.
“We do expect that most of the activity will be ahead of us in the season. We’ll be closely watching the Pacific tropics for any change, any transition from neutral to more conducive conditions over there for impacts on the Atlantic,” he said.
“We know that the models gradually deteriorate and so does their performance.” Kamil Kluza, Climate X
John Dickson, chief executive officer and president at specialist flood insurance agency Aon Edge, echoed those comments, saying that across the industry it was already broadly accepted that 2021 was going to bring significant storm activity in the Atlantic—in terms of size and numbers of individual events.
However, he added, it was crucial that carriers did not simply rely on past data to model the fallout, given the shifting nature of the storms and the time frame in which they are likely to emerge.
“The agreed view is that it’s going to be a heavy season. When I consider the predictions from the MGA .
“We have to constantly think about how to look forward and expect the unexpected. These are very dynamic events.”
Kamil Kluza, co-founder and chief product officer of Climate X, a climate-related risk data and analytics platform which uses remote sensing, artificial intelligence (AI) and geospatial modelling to analyse climate-linked risks, highlighted that recurring heat domes over the US and Canada were impacting the efficacy of climate models but added that the re/insurance industry needed to update the approaches used in traditional catastrophe models. In their current state, they were unsustainable for measuring the risks accurately.
“We know that the models gradually deteriorate and so does their performance. If someone comes to me now and says they are certain we’re going to have 25 or 35 hurricanes in the North Atlantic followed by outbreaks, we have to ask about accuracy and how they’ve measured it,” he said.
“The time has come when the cat models should probably evolve in their approach, incorporating other metrics. We all know the way that cat models have been built isn’t sustainable and won’t help with the long-term view of how certain risks will be shaped.”
To view the full Re/insurance Lounge session click here
Monte Carlo 2021, KCC, Aon, Hurricane Ida, Climate Change, Catastrophe, Insurance, Reinsurance, Dan Ward, Steve Bowen, John Dickson, North America, Global