The arrival of three intense hurricane events – Helene, Milton and Kirk – strikingly late in the North Atlantic season this year, shows the importance of understanding how these catastrophic weather patterns are changing.
And as we head into a new Australian tropical cyclone season with a higher-than-average likelihood of severe storms,1 it is critical for insurers to have a global perspective on this peril.
The North Atlantic events were notable for several reasons. Helene and Milton, which struck in Florida in late September and early October, underwent unusually explosive periods of rapid intensification, strengthening to Category 4 or 5 hurricanes (respectively) in a matter of hours. This phenomenon – caused in part by warmer sea surface temperatures – not only makes them harder to forecast, but is also associated with higher winds and more widespread flooding.
Hurricane Kirk, meanwhile, which developed off the coast of west Africa, transitioned into a European windstorm event – a so-called post-tropical cyclone or PTC – and caused widespread flooding across Western Europe.
Compounding issues of changing weather patterns, rising sea levels, and increasing coastal exposure, all create a perfect storm for heightened tropical cyclone risk.
Introducing the Global Tropical Cyclone Research Consortium
For this reason, Gallagher Re has launched its new Global Tropical Cyclone Research Consortium, established within the Gallagher Research Centre, to help address challenges faced within the (re)insurance industry and beyond. In what is a first for the industry, we are bringing together world-leading academic partners on a number of research themes, to give our clients a truly global perspective on how this peril is changing – and what that means, in concrete risk terms, for their portfolios.
Most recently, the Gallagher Research Centre has signed new partnership agreements with Federation University in Australia and Vrije Universiteit Amsterdam in the Netherlands, adding to our existing work program with Colorado State University (CSU) in the US.
Federation University will be undertaking research into cyclones in the Western Pacific and Australian regions with a focus on tropical cyclone-induced flooding and its impacts for the Australian Reinsurance Cyclone Pool; how cyclone activity in the region will change in the future; and whether historical data and losses provide an accurate view of today’s tropical cyclone risk across the Western Pacific and Australia.
Vrije Universiteit Amsterdam will be looking at the trend of transitioning cyclones that spread beyond the tropics and become PTCs, such as the recent Storm Kirk, which can bring widespread severe weather to areas of Europe.
Together, the aim is to produce an increasingly substantial body of work on global tropical cyclone activity, how these intense storms might be changing, and what the implications for the insurance industry will be.
As well as the obvious public benefit of such work, Gallagher Re’s clients also benefit from cutting-edge insights into the risks they face in their portfolios – which in turn can improve decision-making across the full risk transfer chain, including during (re)insurance discussions. Cedants with the latest, robust scientific and meteorological evidence at their fingertips will fare better in renewal discussions than those without.
Gauging the insurance impact
The consortium’s work is focused on issues of critical importance, both to insurers and to wider society.
Rapid intensification of hurricanes
Rapid intensification is defined as an increase in wind speed of at least 35 mph within a 24-hour period. When combined with traditional uncertainties in cyclone forecasting, this phenomenon can make tropical cyclone preparedness significantly more challenging. The structural impacts that can arise from rapid intensification of a cyclone, including a larger wind field and subsequently more coastal storm surge risk, can lead to potentially larger damage footprints, losses, and humanitarian impacts in the future. This phenomenon was recently witnessed in relation to hurricanes Helene and Milton, both of which underwent extreme rapid intensification prior to landfall in Florida.
In particular, the research from Dr Phil Klotzbach and Dr Levi Silvers at CSU is looking at how the multi-year climate cycle known as ENSO (El Niño Southern Oscillation) may directly tie into the rapid intensification process of tropical cyclone activity around the world. Early findings indicate that El Niño conditions may enhance rapid intensification in the eastern and central North Pacific, but reduce it in the Atlantic, with full insights due in a yet-to-be published journal paper which will be available in the coming months.
Cyclone-induced flooding in Australia
At Federation University, meanwhile, Associate Professor Savin Chand and his team will be exploring how we can better quantify the rainfall impacts from cyclones – which has particular implications for Australia’s government-backed Cyclone Reinsurance Pool – among other tropical cyclone risk topics.
Australia has experienced intense, prolonged cyclone-induced rainfall several times in recent years. This was shown most strikingly during Tropical Cyclone Jasper in late 2023, which brought record-breaking rainfall across North Queensland. Rainfall levels were elevated for days after the cyclone had transitioned to an extra-tropical event, leading to severe flooding. Since the government-backed Cyclone Pool has a time-limit of 48 hours on the losses it covers, it is particularly important to understand the nature of tropical cyclone-induced rainfall in relation to this 48-hour event definition.
Heather Bone, CEO of Gallagher Re Australia, said: “Current available risk models do not fully capture the nuances of tropical cyclone behaviour, including the cascading impacts of wind, flooding, and storm surge, which makes it difficult to accurately assess and quantify the risk.”
“As we saw with Jasper, cyclones that have transitioned to ex-tropical cyclones can still cause significant rainfall-related damage after their cyclonic status officially ends. This makes it difficult for insurers to manage their risk. The Australian Cyclone Pool requires insurers to understand how much of their tropical cyclone risk is transferred to the pool, but this is currently very difficult to quantify.”
“As a result, the research with Federation University will provide us, and our clients, with important insights to allow us to quantify the flood risk that falls within and outside of the tropical cyclone reinsurance pool, as well as how these events might change due to a changing climate, for improved risk management.”
Post-tropical cyclone risk
Post-tropical cyclones (PTCs) are also not well captured in current risk models, which is a challenge that Gallagher Re is looking to overcome through its work with Dr Nadia Bloemendaal at Vrije Universiteit Amsterdam.
PTCs are typically split geographically, meaning storms that originate outside the model domain may not be considered fully in the event set. However, it’s vital to capture the entire journey of a tropical cyclone as it tracks into higher latitudes (or lower latitudes in the Southern Hemisphere) from tropical regions, transitioning into a PTC. These transitioning storms can reduce in wind speed intensity from their tropical origins, but can bring extreme rainfall, high winds and storm surges across large regions and result in significant aggregate losses across a portfolio from the same event.
This research with Vrije Universiteit Amsterdam will help develop risk modelling data and tools which Gallagher Re can use to model and quantify the risk of PTCs from a (re)insurance perspective.
Dr Iain Willis, Research Director at the Gallagher Research Centre, said: “Tropical cyclones pose a significant risk around the world, causing USD2.17 trillion in economic losses and USD710 billion in insured losses since 2000.2
“That is why we are bringing together world-leading experts in tropical cyclone risk, starting with our partnerships with Federation University, Colorado State University and Vrije Universiteit Amsterdam, for what we believe is the insurance industry’s first global initiative of this kind. This will help us address the challenges currently facing (re)insurers when assessing tropical cyclone activity around the world, and enable our clients to improve their management of the risk.”
