‘Neutral’ typhoon season predicted

May 10 2019 by Nick Ferguson

Reinsurers in Asia may get some respite this year, with the typhoon season forecast to be below average.

After a costly year for natural catastrophe losses in Asia in 2018, Guy Carpenter is predicting that fewer tropical cyclones than normal will make landfall during the May-to-October period thanks to a weak El Nino effect.

The prediction, which is based on a regional climate model developed by Guy Carpenter’s Asia-Pacific Climate Impact Centre and City University of Hong Kong, is for 18 typhoons to form in the western North Pacific basin and for 11 to make landfall.

While this is only slightly below average for the region as a whole, the good news is that weak El Nino years in the past have been associated with significantly fewer typhoons making landfall in the South China sub-region — down to just 2.2 from an overall average of 4.3.

That should be welcomed in Hong Kong, Macau and Guangdong, where Super Typhoon Mangkhut wreaked havoc last September and Typhoon Hato caused significant damage in August 2017.

However, the effect is less pronounced for Japan and Korea, where two super typhoons struck Japan last year — Trami and Jebi. The number of typhoons making landfall in this part of the region is very slightly higher than normal during weak El Nino years, though insured losses can still be high even if fewer typhoons are formed or make landfall overall.

Even so, all such observations are based on a limited data set — there have been just five weak El Nino years since 1977. And 2018 was one of them.

Far from being a quiet year, there were 29 named tropical cyclones in 2018, which was higher than the average of 26 and significantly higher than the prediction of 20. If 2019 proves to be a more active year than predicted, reinsurers could be in for another year of stinging losses.

It is tempting to think that higher ocean temperatures caused by global warming will produce more tropical cyclones and that predictions based on historical data will underestimate this, but climate scientists tend to be circumspect about the effects.

While warmer oceans provide more energy for tropical cyclones to form, the factors that lead to the formation and development of such storms are not perfectly understood. However, some models forecast an increase in the intensity of storms, even if the overall level of activity remains similar.

From an insurance perspective, the discussion may be moot. The main economic losses caused by typhoons are from flooding and on that subject everyone is agreed. Warmer seas will mean more rain in general and wetter storms, with models projecting an increase of 10-15% for rainfall rates within storm systems when global temperatures reach 2C of warming. Added to this is the effect of sea level rise, which could cause bigger storm surges.

In 2018, Asia accounted for 43% of all natural catastrophe events worldwide and three-quarters of fatalities, according to Munich Re, with close to US$20 billion of insured losses, mostly in Japan.

A quieter 2019 would doubtless be welcomed by the industry and the communities that are at risk.

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