The Atlantic hurricane season is almost a month old. Two events have already happened that could improperly shape our vision of this year’s storm season if we don’t keep a proper perspective on it. The first event was the announcement that this year’s El Niño will further reduce impact of hurricane season this year. The second event was the short-lived Tropical Storm Arthur.
This isn’t to say that Arthur had no impact on people or property, but the short duration and relative weakness of the storm, combined with the lower-than-average forecast create a situation where we might be tempted to let our guard down when it comes to this hurricane season, which would be a mistake.
“Below normal” does not mean “no risk”
NOAA’s 2026 hurricane forecast tells us that they expect 8-14 named storms, 3-6 of which could be hurricanes, and 1-3 of those may be major hurricanes. They believe that there is a 55% chance that this will be below normal year. Meanwhile, Colorado State University forecasts a 24% chance that at least one major hurricane will make landfall somewhere on the East Coast of the US.
All that means that there is a lower-than-average chance that a storm will make landfall in the eastern US and that it might be a major storm, and it also might not be. That’s the nature of a forecast. They use numbers and statistics to tell us what they calculate will happen, but that doesn’t mean that things will go exactly the way they forecast. Forecasts cannot account for outlier events, or low probability events. The purpose of a forecast is to plan for the most likely events.
Which takes us back to the truth that even when there is a low probability of an event, it is not a zero probability, which is the only situation where an event will not (or cannot) happen. As insurance professionals, our job is to help make people aware of those low probability (frequency) events so that when they happen, people are prepared for them, and the risk is properly managed. While we are aware, and grateful, that this is a low probability year for tropical cyclone exposure, we are also aware that there are still risks associated with this season of the year.
Flood. What’s the risk?
Tropical cyclones are wind and rain events. You’re already aware of that. In a year when the chances of a high-risk event, such as a major hurricane, are low, we should shift our focus to what could happen when other tropical cyclones make landfall.
Tropical cyclones gain energy from spending time over warm ocean waters, like we see around the East Coast and Gulf Coast. When the storm makes landfall, all of that water has to go somewhere. It rains. You’re already aware of this, but there’s more going on than just the rain. The reason we call one storm a tropical storm and another one a hurricane has to do with one factor, the measured wind speeds within the storm.
When the storm measures wind speeds between 39-73 miles per hour, we call it a tropical storm. Once those wind speeds get to 74 miles per hour, we call it a hurricane. Sometimes, people get the idea that the slower the winds, the less we have to worry about. That’s not completely true. Maybe the winds are less concerning, but there’s still rain to deal with. When we focus on the rainfall amounts, we are less concerned about the wind speeds, but the forward velocity of the storm, how fast it’s moving in whatever direction it’s going.
Slower moving storms, even with lower wind speeds, can deliver significant amounts of rain as they begin to lose their forward velocity. In 2017, Hurricane Harvey made landfall as a Category 4 Hurricane, but immediately lost strength and it wasn’t long before it was downgraded to a Category 1 Hurricane. It’s impact was the 60 inches of rain dropped over the Houston area in a matter of four days.
In a year when we are expecting fewer storm impacts, we should still be aware that any tropical cyclone can deliver devastating amounts of rain and when you combine that with the fact that most properties in the United States do not have any kind of flood insurance protection, you discover a glaring coverage gap for many. The simple answer might be to do a Write-Your-Own Flood policy from the NFIP, and that will meet the needs of many insureds. On the other hand, there are more private flood insurers available today than ever. Private coverage outside of the NFIP could be as easily available as an NFIP policy for a comparable price to many insureds.
Values, deductibles, roofs, and coverage
Coverage issues aren’t special to hurricane season, but they do get amplified when you consider the potential that there won’t be a couple of claims. There may be hundreds of claims if a hurricane makes landfall anywhere along the East Coast.
The most glaring of coverage issues that arise is in the valuation of property. It’s been firmly established by others that there is a huge undervaluation problem in the United States insurance market. Property policies that adequately cover property for replacement cost when the policy is new don’t by the fifth, or second, renewal. The cost to rebuild a property is affected as much by normal inflationary factors as it is the additional inflationary factor of hurricane-related supply and demand. Any property policy that hasn’t been reviewed within the last year is almost assured to be undervalued. The only real question is how much.
Deductibles are another issue that cannot be ignored as we go into hurricane season, specifically, hurricane and wind and hail deductibles. Anyone who is writing property in a hurricane (or wind) prone area understands that the addition of a hurricane deductible increases complexity to a potentially difficult loss situation. Most insureds are aware that deductibles apply to losses, but what they might not be aware of is how hurricane or wind deductibles might apply this time of year. Hurricane deductibles are often set as a percentage of the replacement cost of the covered property. Depending on the building, the insured could be self-insuring tens of thousands of dollars. Then if you consider how many hurricane deductibles apply, the insured isn’t just paying one deductible for the loss, but a deductible that applies for each damaged item of covered property. They could have a deductible for each building and another deductible for the personal property associated with that building. It adds up fast.
Over the last few years, one way that insurance companies have mitigated their risks of property loss have come through the recognition of one of the major loss drivers, the roof. Through the use of different limiting endorsements, insurance companies have shifted the risk of loss from a damaged roof back to the insured. Some carriers are using endorsements that exclude damage to roofing material that is cosmetically damaged, but could still appear to be functional. Other carriers are limiting coverage for roofing materials to actual cash value.
A below normal hurricane season isn’t a time to rest on what happened last year, and trust that the numbers will play out in your clients’ favor. Rather, it’s time for another round of policy reviews to make sure that the insured is at least educated on their insurance gaps. It’s time for a round of valuation reviews to ensure that policy limits are sufficient to meet the insured’s needs. It’s time to look for exclusions and limitations that can be overcome with the right endorsement, additional policy, or moving coverage.