The 2024 Atlantic hurricane season, initially forecasted to be highly active, underscored the unpredictable nature of catastrophe losses across re/insurance, according to a review by Twelve Capital.
Despite warm sea surface temperatures and a shift away from El Niño conditions creating favorable conditions for storms, competing factors, such as Saharan dust, tempered storm development. As a result, the season’s impact on the reinsurance and catastrophe bond (cat bond) markets is expected to be muted.
Twelve Capital noted that while there were several significant hurricanes, their landfalls largely avoided major metropolitan areas, limiting insured losses from these events. Overall, the season recorded 18 named storms, 11 of which reached hurricane strength, including five that intensified to Category 3 or higher.
The 2024 Atlantic hurricane season saw an estimated US$30-50 billion in insured losses attributed to hurricanes. However, Twelve Capital highlighted in its report that the majority of insured losses from natural catastrophes this year – exceeding US$50 billion – will stem from secondary perils, such as wildfires, tornadoes, and floods.
Notable storms included Hurricane Beryl, which became the earliest Category 5 hurricane on record in the Atlantic. Hurricane Helene, a Category 4 storm, made landfall in the US and ranked as the 14th most powerful hurricane to strike the country since record-keeping began.
Hurricane Milton exhibited rapid intensification, escalating from a tropical storm to a Category 5 hurricane in just 24 hours. Although Milton weakened before landfall, it briefly became the fifth most intense Atlantic hurricane on record.
While hurricanes captured much attention, Twelve Capital emphasized the significant contribution of secondary perils to overall insured losses in 2024. Severe convective storms, including tornadoes and hail events, have already accounted for more than US$50 billion in insured losses as of Q3 2024.
Twelve Capital noted that such events represent a "new normal" for this peril, requiring continued focus and risk management strategies.
The cat bond market has experienced minimal losses in 2024, despite erosion from severe convective storm activity earlier in the year. According to Twelve Capital, these aggregate losses left some cat bonds more exposed heading into the hurricane season, but the impact remained limited due to the relatively low severity of landfalling storms in densely populated areas.
Twelve Capital observed that the hurricane season reaffirmed the stochastic nature of catastrophe events. Even with favorable conditions for heightened activity, the outcomes proved less severe for the reinsurance and cat bond markets than initially anticipated.
Early indicators for the 2025 Atlantic hurricane season suggest a potential shift toward neutral or El Niño conditions during the peak period. Twelve Capital cautioned that it remains uncertain how these factors will interact with the persistent warmth of Atlantic waters, which has played a critical role in recent seasons.
As the insurance and reinsurance markets reflect on the dynamics of the 2024 season, the continued focus on understanding and managing risks associated with both peak and secondary perils will be essential for long-term resilience.
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