Hurricane season could top last year’s $100B damage costs, experts say

The hurricane season this year got off to an historically early start with July’s Hurricane Beryl causing more than $6.3 billion in insured property damage in the U.S., Gulf of Mexico, and the Caribbean. Storm trackers say the early emergence of the storm could be a sign of a record-breaking season this year that might exceed the $100 billion in property damage from hurricanes in 2023.

“Beryl was the earliest Category 5 storm on record even though the season typically begins June 1 we really don’t see major storms until late August or early September and into October” said Mike Prindle, senior vice president and leader of complex property at CAC Specialty, a specialty insurance broker and advisor headquartered in Denver. “I think the fact that we had that big of a storm that early is something of a bad omen for the rest of the season.”

The National Oceanic and Atmospheric Administration’s (NOAA) 2024 Atlantic Hurricane Season forecast predicts an above-normal hurricane season this year with a range of 17-25 total named storms. Of those, 8 to 13 are forecast to become hurricanes, including 4 to 7 major hurricanes (category 3,4, or 5).

AccuWeather meteorologists are similarly forecasting 20-25 named storms across the Atlantic basin, including 8-12 hurricanes, four to seven major hurricanes and four to six direct U.S. impacts.

Most active forecast seen

The 2024 LSU-Velocity Risk Gulf of Mexico Hurricane Outlook shows the most active forecast ever encountered.  The Outlook, which is generated using a machine-learning algorithm that pores through months of near-term climate model predictions, is detecting signals that rival the historically busy 2005 and 2020 hurricane seasons. In fact, based on the frequency of favorable conditions compared to more typical seasons, model predicts 14 tropical cyclones in the Gulf of Mexico – tropical depressions, tropical storms or hurricanes. Officially the LSU team predicts 12 storms. The 2005 and 2020 hurricane seasons both experienced 11 tropical cyclones in the Gulf of Mexico.

“An active and costly hurricane season could exacerbate the challenges that many policyholders across the U.S., but particularly in disaster-prone regions like the hurricane exposed coastline, face with rising insurance costs and availability challenges,” said Michael Richmond Crum, senior director of personal lines at the American Property Casualty Insurance Association. “It is critical for residents to take steps now to reduce the potential for damage to their property during hurricane season.”

Claims costs skyrocketed in the last few years due to inflation, supply chain disruptions, and other post-pandemic factors were expected to ease somewhat heading into the 2024 season. But a rise in the number of damaging storms could quell those hopes.

P&C 'very difficult' for past 5 years

“The North American property insurance market has been very difficult for the better part of five years now,” said Prindle “In 2024, we started to see some relief. But it's a very fragile market and when we're going into a hurricane season that's supposed to be above average, the entire market is focused on that. We're constantly advising clients and prospects way out from their renewal date.  Clients that have renewals due in April and May of 2025 are already asking us to predict what things could look like from a budgetary perspective.”

It’s not just hurricanes that have businesses, residents and insurers on edge. As of July 16, there had been 1,412 tornado reports in the US, well ahead of the 2010-2024 historical average of 997, according to NOAA’s Storm Prediction Center. In fact, 2024 has already had more tornadoes than the average annual total of 1,402, with some occurring in unexpected places, like Chicago.

Tornado outbreaks at the end of April and the month of May quickly raised 2024 above the historical average. Since then, a steady stream of tornadoes, including dozens during Hurricane Beryl, increased that number even higher. The biggest year on record for tornadoes was 2011. By July 10 that year, the US had racked up 1,934 tornado reports and would ultimately reach 2,250 for the year.

Insurers can only cross their fingers and hope for the best.

“If it becomes a more benign storm season than was expected, I think the market competition is going to continue into next year, meaning we're going to have a better market for buyers,” said Prindle. “If it's a very difficult or above-average season, I think we could be right back into, potentially, the market that we saw in 2023, which was a very difficult property market.”

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].