It has been a quiet year for Atlantic hurricanes, and it is increasingly likely to stay that way. In the first of a series of columns, Dr Tim Hall from NASA forecasts reduced odds for US hurricane landfalls during the remainder of the season.Cat bonds are marketed using default probabilities that are based on long term average hurricane activity. Dr Hall and others are able to improve on these forecasts by using current meteorological conditions as inputs for their models.
Dr Hall’s model forecasts below average activity for the rest of the year. This means that relying on long term cat models could overestimate the likelihood of default. In Texas and East Florida, he estimates that the probability of a large hurricane is more than 30% less than would be calculated using historical averages alone.
There is, roughly, 50:50 chance for a post September 1 hurricane to make landfall somewhere in the US based solely on long-term hurricane behaviour. However, climate conditions that vary month-to-month are known to affect hurricanes. By using the current atmospheric conditions and forecasts for the next few months, it is clear that there is a lower chance of a devastating hurricane in the US than we would usually expect.
To read the full report and to view its findings, visit Insurance Linked