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2017 Atlantic Hurricane Season Outlook

With the official opening of 2017 Atlantic hurricane season fast approaching, researchers appear cautiously optimistic the relatively quiet streak will continue.

Today, Colorado State University’s Tropical Meteorology Project released the extended range forecast of 2017 Atlantic seasonal hurricane activity, predicting slightly below-average activity in the Atlantic basin, with a forecast of 11 named storms, four hurricanes, and two major hurricanes.

Philip Klotzbach, CSU

The probability of at least one major (Category 3+) hurricane making landfall on the entire U.S. coastline is 42%, compared to an average of 52% over the past century. The probability of such a storm hitting the East Coast, including peninsula Florida is 24%, compared to an average of 31%. Thus, CSU noted, the estimated probability of a major hurricane making landfall in the U.S. this season is approximately 80% of the long-period average.

Hurricane activity may not be as critical a determinant for how insurers and property-owners will fare, however. Aon Benfield’s Global Catastrophe Recap reports have consistently noted the rising toll of economic and insured losses due to severe weather events including severe thunderstorms, hailstorms, and flash flooding. In Texas alone, for example, Aon Benfield reports the state incurred record thunderstorm-related losses for the year, with insurers citing costs exceeding $8.0 billion.

Other recent studies support this trend. In the Willis Re and Columbia University report Managing Severe Thunderstorm Risk, researchers found the risk to U.S. property from thunderstorms is just as high as from hurricanes. Their review of Verisk Analytics loss statistics for 2003 to 2015 found the average annual loss from severe convective storms including tornadoes and hailstorms was $11.23 billion, compared to $11.28 billion from hurricanes. Considering the past decade alone, severe convective storms posed the largest annual aggregated risk peril to the insurance industry.

willis re severe convective storms

Flood, Wind Dominant Natural Hazards in 2016

While most natural hazards occurring in the United States last year saw average or below average activity, the exceptions were flood and wind, according to the CoreLogic report Natural Hazard Risk Summary and Analysis, released today.

Severe flood events driven by substantial rainfall were the dominant natural hazards, with Louisiana and North Carolina floods being the major loss contributors. As in 2015, hurricanes and tropical storms in 2016 continued to cause inland flooding through increased and intense rainfall—even when not making landfall, according to the report.

The National Oceanic and Atmospheric Administration (NOAA) said there were 12 individual weather and climate disaster events in the U.S. with losses exceeding $1 billion in 2016.

According to the report:

  • Based on NOAA and CoreLogic analysis, the overall flood loss in 2016, driven by six, 1,000-year plus rain events, was approximately $17 billion, which is six times greater than the overall flood damage experienced in 2015.
  • The U.S. Geological Survey (USGS) recorded 943 earthquakes of magnitude 3.0 or greater in 2016, with more than 60 percent of these earthquakes located in Oklahoma.
  • The National Interagency Fire Center (NIFC) reported a total of 5,415,121 acres burned from 62,864 separate fires in 2016.
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    While the total acres burned in 2016 fell below the 10-year average, significant losses occurred, with thousands of homes in California and Tennessee destroyed by several smaller fires that burned in populated areas.

  • Wind activity in 2016 was slightly above average, due in large part to strong winds brought by Hurricane Matthew.
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  • Hail activity in 2016 was near the average, and Texas experienced the worst of this natural hazard.
  • Tornado activity in 2016 was near average compared with previous years.
  • Hurricane Matthew developed late in the year and grew to a Category 5 storm, resulting in substantial damage along the southeastern seaboard.
  • There were below-average levels of tropical cyclone activity in the western North Pacific Basin encompassing East and Southeast Asia in 2016.

However, 2016 became known as the year without a winter. Nine winter storms impacted the U.S. in 2016, the most notable being the late-January winter storm in New York.

“History has continually shown us that it is impossible to determine exactly when or where the next wildfire, flood or earthquake will strike, which is why preparedness, response and post-loss assessment are paramount,” CoreLogic said.

Business Interruption Seen as Top Risk Globally

A survey of more than 1,200 risk managers and corporate insurance experts in over 50 countries identified business interruption as the top concern for 2017. According to the sixth annual Allianz Risk Barometer of top business risks, this is the fifth successive year that business interruption has been seen as the biggest risk.
top-10-risks

“Companies worldwide are bracing for a year of uncertainty,” Chris Fischer Hirs, CEO of AGCS said in a statement. “They are concerned about rather unpredictable changes in the legal, geopolitical and market environment around the world. A range of new risks are emerging beyond the perennial perils of fire and natural catastrophes and require re-thinking of current monitoring and risk management tools.”

While natural disasters and fires are what businesses fear most, non-damage events such as a cyber incident, terrorism or political violence resulting in denial of access are moving higher up on the scale, according to the report. These types of incidents can cause large loss of income to companies, without actual physical loss.

The second concern, market developments, could result from stagnant markets or M&As, or from digitalization and use of new technologies.

Cyberrisk, third on the list of perils, has jumped up from 15th place in just four years. Cyber was identified as the second concern in the United States and Europe.

According to Allianz:

The results indicate that cyber risk occupies a significant portion of a company’s exposure map. The risk now goes far and beyond the issue of privacy and data breaches. A single incident, be it a technical glitch, human error or an attack, can lead to severe business interruption, loss of market share and cause reputational damage. Of the top 10 global risks in the 2017 Allianz Risk Barometer, a cyber incident could be a potential root cause or trigger for 50% of them. In addition, the toughening of data protection regulation regimes around the world is also contributing to this risk being at the forefront of risk managers’ minds, as penalties for non-compliance are increasingly severe.

Fourth on the list, natural catastrophes added up to $150 billion in total economic losses in 2016—with insured losses accounting for $42 billion of those losses—up from $28 billion in 2015, according to the report. Businesses also are more concerned about the impact of climate change and increasing weather volatility year-on-year.

Trump outlook for 2017

“Opportunities and challenges,” says Ludovic Subran, head of Euler Hermes Economic Research and deputy chief economist of Allianz research. “Companies which are domestic, either a regional multinational or national, will benefit. However, the business environment for large multi-national corporations who do have global, strongly regionally diversified business models will be more challenging. Stronger regional interests will make the lives of companies more complicated as there will be increasing protectionist regulation.”

Moving Employees Safely is Critical in Oil & Gas Industry

oil-rigs
The oil, gas and marine industry has always teetered on the brink of unfortunate circumstances. Oil rigs and oil tankers, by the very nature of their massive size and exposure to the elements, are susceptible to myriad dangers. And when those risks materialize, the safety of the men and women operating these maritime behemoths must take top priority.

In the case of a hurricane, energy giant Shell Oil says it begins evacuating non-essential personnel from offshore platforms and drilling rigs, starting with sites closest to the hurricane’s anticipated path. Like Shell, most of the larger oil companies have evacuation down to a science, particularly during hurricane season. In many cases the evacuation from oil rigs or oil tankers is highly manageable, with no more than a few dozen people having to be transported at times. Thus, in most cases, the evacuees can simply grab a taxi, book themselves into a hotel room, or make other similar accommodations.

But what happens when the evacuation is so immense that you are suddenly relocating thousands of workers to the nearest mainland?

In October 2014, with the threat of a cyclone ready to batter the Gulf of Mexico, Mexico’s state oil company, Pemex, evacuated 15,000 workers from more than 60 platforms in the Gulf of Mexico—all with the need to be transported and lodged.

Anticipating worst case scenarios is a prerequisite. Although travel by executives at the C-suite level in these types of companies is handled with the highest priority, to deal with the constant movement of lower-level workers, many companies enlist the services of travel management companies to coordinate getting personnel from land to rigs, tankers, drills and pipelines and back. This massive orchestration includes coordinating accommodations, lodging, weather alerts, translation services and other types of ticketing.

Certain industries, such as oil and gas, need to send employees to work in the world’s “hot zones.” According to a USA Today report, three Americans were among 38 workers killed in the 2013 siege of an Algerian gas plant in which Islamic terrorists used hostages as human shields after their attempted mass kidnapping for ransom went awry. Seven U.S. citizens survived the attack. This illustrates that the need to move crews swiftly isn’t always at the mercy of weather conditions. This is where a real-time knowledge of the current political climate is necessary, including the best exit points, and how to travel safely within those countries should the need to evacuate a facility arise.

Other times the challenge includes getting workers from a major airport to a remote location—perhaps where a helicopter undertakes the last leg of the trip out to the site. Oil and gas industry travelers also need to realize that the flight on a major airline to get into a somewhat unstable country isn’t the problem; it’s traveling within the country, where options are often very limited.

Fortunately, the recent boom in technology has helped make personnel travel safer, as they can now receive electronic alerts regarding risks such as natural catastrophes, labor strikes, and changes in flight schedules.

There is the potential for a number of problems to arise when operating these marine locations, both weather-related and man-made. And the cost of finding solutions to these situations can often be crippling and costly to a business, both in terms of valuable staff time wasted as well as the difficulty in finding the time or the resources to source viable, inexpensive travel alternatives.