2021 North Atlantic Hurricane Season ends
Posted 07/12/2021 – Quick takes
The 2021 Atlantic hurricane season officially ended last week. 21 named storms were recorded, making it the third most active on record. All 21 storm names were exhausted for the second consecutive year, following the record breaking 30 named storms in 2020. 2021 was the sixth consecutive year of ‘above-normal’ hurricane activity and the seventh consecutive year that a named storm formed before the traditional 1st June start of the hurricane season. There were seven storms of hurricane level intensity, six fewer than last year. Four major hurricanes (i.e. category 3 or above), namely Grace, Ida, Larry and Sam. This is slightly higher than the 10-year average and the US National Oceanic and Atmospheric Administration’s definition of ‘average’ being three major hurricanes in any year.
Earlier in the year, we collated forecasts from some respected commentators, and these were broadly accurate. Although the 21 named storms recorded was higher than any of the forecasts, the total number of hurricanes (seven) was in line with or below many of the forecasts and the number of major hurricanes (four) was well within expectation.
Given that the majority of storms dissipated without making landfall and caused little or no damage or loss of life, this hurricane season is more likely to be remembered for the effects of Hurricane Ida rather than the large number of storms. Claims from Hurricane Ida are slowly filtering through and there are hopes that the loss estimates we most recently reported, may be pessimistic and ultimate losses could end up below the $40bn market estimate. Despite this, Hurricane Ida will be one of the most costly hurricanes in history and, consequently, the 2021 hurricane season will be one of the most expensive for insurers and reinsurers.
Given that 2021 represents the sixth consecutive year of ‘above-normal’ activity, this suggests we are now operating in a ‘new normal’, perhaps as the result of climate change and an increase in ocean temperatures. Although there were 21 named storms, twenty of them were fairly benign (from an insurance perspective), Hurricane Ida proved to be significant, making 2021 one of the most costly hurricane seasons on record. This highlights the unpredictability of insured losses in relation to: the number of storms; the number of hurricanes; or the number of major hurricanes. Ida, for instance, caused more damage than the seven major hurricanes in 2020 combined. The Hurricane Ida losses in 2021 underlines Alpha’s consistent view that significantly more rate is required across the property lines – particularly for treaty and retrocession. As such, we remain hopeful that we will see continuing premium hardening at the January renewals and throughout 2022. Despite the Ida losses, we are still expecting our members’ portfolios to be profitable for the 2021 year of account.