JLT Re, the reinsurance arm of international brokerage JLT, has warned that future climate scenarios suggest that Northeast U.S. hurricane tail exposure is greater than historical averages claim.
The warning comes from Josh Darr, Senior Vice President (SVP) & Lead Meteorologist of JLT Re North America, addressing an audience at a recent reinsurance and catastrophe management conference.
Specifically, Darr highlighted the potential for tail risk increasing on high latitude late season hurricanes, noting that research on previous and future climate scenarios throughout the Northeast U.S. and maritime Canada, underlines increased hurricane exposure than seen in recent decades.
Furthermore, land falling hurricane tracks in the U.S. and Japan have also deviated from historical norms, says the broker, which amplifies damage potential and therefore the costs.
“Recent hurricane seasons have seen an increase in hurricanes making landfall at high latitudes relative to the record inactive period of intense hurricane landfalls across the Gulf Coast and Florida regions. Recent land falling storms in both the northern U.S. and Japan have had a unique perpendicular landfall relative to the north/south coastlines. Hurricanes and typhoons tracking towards the west at landfall at high latitudes represent a configuration that has been rare in the historical record. The confluence of these rare tracks hitting major population zones represents a potential increase in risk relative to the historical record,” said Darr.
Greater tail risk from U.S. hurricanes than previously anticipated could result in an increased demand for reinsurance protection, and also insurance-linked securities (ILS) capacity, both of which specialise in protecting tail risks.
The reinsurance broker explained that it examined a number of areas to try to identify if high latitude hurricane risk is changing, including the impact of recent research on Atlantic Ocean temperatures relative to landfall frequencies.
Other examinations include sand core samples tracing northeast U.S. hurricane activity back 2000 years, potential impact of global warming on dormancy of trees relative to late season landfalls, drought or flood, pre landfall, that impacts the ability of trees to withstand strong winds without toppling, changes in jet stream patterns, influenced by Arctic warming, allowing hurricanes to curve directly towards land instead of a glancing blow, and sea level rise impacts on major northeast U.S. cities with a potential storm surge event, said JLT Re.
“While some of the variables above increase or decrease the hurricane risk, overall it appears in aggregate that hurricane risk in future decades for the Northeast is potentially higher than the historical average of the late 20th century and early 21st century,” said Darr.