The 2024 North Atlantic hurricane season has demonstrated that more frequent and intense severe weather can, and does, drive more complex and difficult claims. Jeremy Hughes looks at the numbers

Even as the North Atlantic hurricane season approached its close on 30th November, Hurricane Rafael was drawing watchers’ concern: the second-latest major hurricane in the Gulf of Mexico, behind 1985’s Kate, Rafael ultimately spent itself in the Gulf of Mexico. But it crowned an anomalous season, with 11 named hurricanes – a phenomenon that had only happened eight times since records began in 1851.

This year’s season started ominously with Beryl in late June, the earliest category 5 Atlantic hurricane since records began. Five (Beryl, Debby, Francine, Helene and Milton) made continental US landfalls – unusual in a single season. According to Colorado State University tropical scientist, Phil Klotzbach, it was also the distribution of these events that was abnormal, with the most hurricanes ever forming in the weeks between 25th September and 5th November. Including Rafael, this amounts to seven – back-loading the season with an unprecedented level of activity.

A double whammy

The two most damaging of these, Helene and Milton, made landfall in quick succession in a double-whammy that drove a range of consequences for affected areas. Beyond the challenges for first responders and emergency services, major complications have arisen in how to attribute losses to each event. “Helene and Milton impacting Florida back-to-back over such a short time period could have some impacts on loss development and settlement for both storms,” Verisk said.

Further, complex hazard patterns inherent in such powerful events result in a long chain of consequences. As well as damaging winds, storm surge and inland flooding from rainfall, Milton also generated tornadoes in Florida and twin bands of powerful wind: one to the south of the storm, and one to the north. This blend of factors can lead to confusion for both claimants and insurers.

In addition, structures damaged by Helene were affected by both flood and wind-driven rain. It can be difficult to distinguish between flood and wind damage, leading to unintended payouts for non-covered flood losses under wind coverage.

Fitch acknowledged the potential implications for claims in its initial assessment of Milton’s losses: “Ultimate losses will…depend on demand surge, as Milton follows closely on the heels of Hurricane Helene.”

Mohsen Rahnama, Moody’s chief risk modelling officer, further noted: “Estimating losses in these events is challenging and it is important to consider all associated complexities and uncertainties, especially in the overlapping regions affected by both hurricanes.”

With these complexities in mind, it is unsurprising that damage estimates varied widely in the days and weeks following the storms.

On 30th September, days after Helene cut across North Carolina and Tennessee, Moody’s estimated total property damage would amount to between US$15 billion to US$26 billion. On the same day, CoreLogic estimated that for the insurance industry, wind and storm surge losses could reach US$5 billion, while Gallagher Re projected that losses to private insurance markets could be “in the mid-to-high single-digit billions”.

By early October, the day before Milton’s early potential showed as a broad area of low pressure off the Yucatán Peninsula, risk modelling consultancy Karen Clark & Co stated that privately insured losses from Helene might reach US$ 6.4 billion.

Focus soon shifted to Milton, which reached peak intensity with winds of 180 mph in the first week of October, triggering historic tornado outbreaks in Florida before making landfall after a few days.

As heavy rainfall continued, Fitch estimated Milton’s insured losses as likely to be between US$30 billion and US$50 billion – “the largest insured loss since Hurricane Ian…ravaged a similar path in 2022.” Moody’s put insured losses higher at between US$35 billion and US$55 billion. A week later, Verisk estimated that “insured industry losses to onshore property from Hurricane Milton would be between US$30 billion and US$50 billion”.

Experts were still citing a broad range in their estimates by the middle of the month, when Corelogic estimated that Milton’s insured losses would be between US$17 billion and US$28 billion. It broke the estimates down into causal factors: losses attributable to wind would be between US$13 billion and US$22 billion, not including damage from the storm’s accompanying tornados. Flood losses would amount to between US$4 billion and US$6 billion, including losses assigned to the US National Flood Insurance Program.

Losses in context

Losses in the realm of US$55 billion are high but not unprecedented. Hurricane Ian generated estimated insured losses of US$50 billion to US$65 billion. In that instance, non-life insurers and reinsurers faced profitability pressures, with global post-pandemic inflation and rising interest rates, coupled with six previous years’ high insured property losses driving a capacity squeeze.

After Ian there were also implications for the broader market. According to S&P Global, the world’s top 50 property and casualty companies increased their collective premiums by nearly nine per cent year over year in 2023 against a backdrop of rising prices for insurance and reinsurance coverage.

While 2024’s claims will take time to be assessed and processed, insurers already know their bottom line will be affected. As Fitch states, “Milton will be a Q4 and 2024 earnings event for large rated insurers with Florida exposure.” In the short term, equity markets agreed: on 7th October, when Milton strengthened into a Category 4 storm, US property and casualty insurance stocks dropped sharply; yet they proved resilient in the following weeks, however, as a clearer picture of the damage emerged. Reflecting this, Aon’s analysts regarded Milton’s losses, building on those of Helene, as “significant, but not a doomsday scenario” for insurance companies.

In its Q3 results, Zurich reported a projected pre-tax loss of around US$160 million for Hurricane Helene. It also expects preliminary Q4 pre-tax losses from Hurricane Milton to be slightly under US$200 million. American International Group experienced a 28 per cent decline in Q3 underwriting income in its general insurance business, dropping to US$437 million due to increased catastrophe losses. AIG’s total catastrophe losses in general insurance for Q3 were US$417 million, primarily from North American windstorms and hail, which accounted for US$324 million of that total. Swiss Re also increased reserves in its US P/C division by US$2.4 billion during Q3, which led to a reduction in its full-year profit forecast.

Absorbing the loss

Insurers are expected to rely on the reinsurance industry to absorb a considerable portion of the losses from the 2024 season. As insured losses escalate, reinsurers will shoulder a greater share through excess of loss reinsurance agreements. The exact impact on reinsurers will vary based on the primary insurance policies in place and the terms outlined in reinsurance contracts, but Moody’s expects that most reinsurers should be able to keep their annual catastrophe losses within budgeted limits – although overall 2024 performance is likely to fall short of last year’s results.

Looking further into the risk management landscape, both insurers and reinsurers will have issued cat bonds to redistribute anticipated risk in the capital markets: again, while the 2024 season has had a short-term impact on bond yields, they have proven more resilient than initially expected. After Hurricane Ian in September 2022, the Swiss Re Global Cat Bond Index dropped by a substantial 10 per cent. By comparison, following Milton’s landfall in Florida, the same index softened by just 1.34 per cent – and by 29th October it had not only recovered the lost ground, but stood 0.25 per cent higher than it had when the hurricane hit.

There is no doubt that the 2024 North Atlantic hurricane season has demonstrated that more frequent and intense severe weather will drive more complex and difficult claims. Climate change is leading to more frequent and severe natural disasters which increases the number, size and complexity of events, challenging insurers’ ability to cover the subsequent losses. This year, though, the system has worked: as claims processes continue to play out, established risk transfer mechanisms have flexed but not broken.

Even if the season did not fully deliver on the “extraordinary” prediction issued by US weather agency NOAA in May, this unpredictability, coupled with the increasing size and intensity of the storms and the high number of landfalls, point to a longer-term trend of escalation. The fundamental conditions, particularly rising ocean temperatures, remain.


This article was published in the Q4 2024 issue of CIR Magazine.

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