Until the formation of Hurricanes Danielle and Earl in early September, the 2022 Atlantic hurricane season had got off to an unusually quiet start, with the lowest activity in the Atlantic for 25 years and a complete absence of named storms in August, in contrast to the 10 that occurred the same month in 2021.

Then, in late September, Hurricane Ian struck Cuba, Florida and South Carolina with a vengeance, causing the deaths of over 130 people in the US and five in Cuba, making it the second deadliest storm to make landfall in the continental US in the 21^st century. Only  Hurricane Katrina in 2005 was worse.

Florida has not suffered a storm so fatal since the Labor Day Hurricane of 1935, which killed over 400 people and racked up wind speeds of 185mph/298kph – the strongest storm to ever strike the US.  

With wind speeds of up to 150mph (240km/h) and a radius of 50km/31 miles, Hurricane Ian was just the 15th storm in Florida to be rated a Category 4 storm or higher and only the 37^th major hurricane since records of hurricane intensity began back in 1851. Just seven miles faster and it would have been classed a Category 5. The hurricane ties with seven others for the fifth-strongest storm to hit the US by measure of sustained winds at landfall. Two storms with equally ferocious wind speeds have battered the country in the past two years – Hurricane Ida in 2021 and Hurricane Laura in 2020.  

Hurricane Ian’s storm path had been tricky to forecast, fluctuating widely from its projected track, but the state placed two and a half million people under evacuation orders. As the storm journeyed inland it dumped 250-500mm (10-20in) of rain and caused storm surges of up to 4.5 meters (15ft).

As well as its deadly human toll, Hurricane Ian will result in acute financial losses. Early estimates for insured losses are pitched as high as $53bn by the analytics company CoreLogic and $74bn from risk modeling firm RMS. In comparison, Superstorm Sandy incurred insured losses of over $35bn (in 2021 dollars) and Hurricane Ida $36bn. The most costly hurricane in US history was Hurricane Katrina, which incurred nearly $90bn insured losses (costs adjusted for inflation – see chart). So if the range of these early estimates proves to be correct, Hurricane Ian could ultimately rise up the rankings to become the second costliest hurricane in the US. To be one of the 10 costliest hurricanes in US history in terms of insured losses, Hurricane Ian would have to exceed the $14bn caused by Hurricane Michael in 2018.

Despite the season getting off to a slow start, 2022 is widely expected to be the seventh consecutive year of above-average hurricane activity, with up to 10 hurricanes predicted by the major forecasters. The Atlantic hurricane season officially ends on November 30. 

Analysis of more than 530,000 corporate insurance industry claims worth €88.7bn over the past five years by AGCS shows that natural catastrophes are the second top cause of losses globally for businesses overall, according to value of claims (15%), ranking behind only fire and explosion (21%). Download the AGCS Global Claims Review.

A deeper look at the major causes of natural catastrophe losses, based on analysis of more than 20,000 such claims around the world with an approximate value of €13.7bn, shows that hurricanes/tornados rank top, accounting for 29% of the value of all claims. A major driver is the fact that two Atlantic hurricane seasons out of the previous five (2017 and 2021) are now among the top three most active and costliest seasons on record. Windstorm ranks second (19%), meaning storm activity accounts for close to 50% of the value of nat cat claims globally over the past five years. Flooding ranks third (14%).

Losses continue to rise with climate change, higher property and asset values, more complex supply chains and changes to exposures (such as increasing economic activity in natural catastrophe zones). Soaring inflation will only challenge claims costs further. Property and construction insurance claims, in particular, are exposed to higher inflation, as rebuilds and repairs are linked to the cost of materials and labor, while shortages and longer delivery times inflate business interruption values.

The meteorological conditions that boosted the power of Superstorm Sandy turbocharged the debate about climate change back in 2012. While it is still hard to prove the effect of climate change on the frequency of hurricanes, there is now broader consensus that global warming is increasing their intensity and therefore the damage they can cause. A modeling study [6] from 2021 attributed some of the economic damages wrought by Superstorm Sandy to rising sea levels caused by human-induced climate change and even put a figure on it – $8.1bn.

Karen Clark & Company (KCC) has also linked climate change to increasing insurance damages from hurricanes [7]. The risk modeler says its analysis shows losses are 11% higher today than they would have been if global temperatures had not increased. It notes that a 1°C increase in temperature likely results in a 2.5% increase in hurricane wind speeds and therefore the 1.1°C increase in global temperature since 1900 might have caused a 2.75% increase in wind speeds, leading to exponentially higher losses. Karen Clark wrote recently [8] that “Climate change and increasing property values in coastal areas will continue to accelerate the annual increases in hurricane risk and insured loss potential. Social inflation is also putting upward pressure on hurricane losses. The percentage of litigated claims is rising with each storm and the cost of a litigated claim is multiples of a non-litigated claim.”

“The north-east portion of the US is susceptible to tropical storms and hurricanes, even if they occur infrequently,” says Higgins. “We know that sea level rise is increasing the severity of storm surge along the Atlantic and Gulf Coasts of the US. With hurricanes, the primary sources of damage are from high winds and wind-driven water – storm surge – and between those two, it’s storm surge that generally causes the most damage.”

Higgins notes that enhancements can be made to buildings to withstand high winds relatively easily, but improvements made to increase a building’s resilience to storm surge can be more costly, time-consuming, and complicated to implement. Looking ahead is key.

“Some of our clients have made changes that enable them to react quickly if their region is hit by a hurricane and flooding, says Varney. “For example, one customer provides temporary on-site housing for essential staff members whose homes might be affected by flooding. Another large client has placed trailer-mounted generators in various locations which can be despatched to provide power backup in the case of an electricity outage. We also have a client that entrenches training by having its 200 employees back their vehicles into parking spaces daily so that if evacuation is needed, it can be done in an orderly fashion and without delays.

“One of our manufacturing clients is using storm tracking capability to prepare for the aftermath of a hurricane. It overlays the storm path as it relates to their internal critical facilities and key suppliers. These proactive approaches have minimized or eliminated impacts to production after the storm.”

Despite such measures being taken by some companies, Higgins adds that most are still not fully prepared for the effects of these storms. “If businesses have never been impacted by one of these infrequent events, it can be easy for them to lose focus on maintaining a quality emergency preparedness plan. The question is not whether an extreme weather event will affect a business but when.”

Hurricanes may be associated most strongly with the US, but of course businesses elsewhere in the world have to face the peril of storm and typhoon activity and guard against storm and flood damage. In July 2021, Storm Bernd caused major flooding in Western and Central Europe, causing 200 deaths and incurring [9] insured losses of $13bn. The same month, floods caused by recordbreaking rainfall in Henan Province, China, saw 300 people lose their lives and resulted in around [10] $2bn insured losses. This year, Australia suffered its third costliest extreme weather event in February and March, when flooding in Queensland and New South Wales [11] caused $4.8bn in insured damages.

Analysis by AGCS (see chart) shows storm to be the top cause of nat cat loss by total value of claims in countries such as the UK, Netherlands, Italy, and Australia, while hailstorms have produced some of the most expensive claims in Spain and South Africa in recent years. Flood is the top cause of nat cat loss in France, Germany, China, Canada, and Brazil.

Give your business the best chance of withstanding and recovering from an extreme weather event by putting the following procedures in place:

1. Update and test your emergency preparedness plans: Preparation before the storm minimizes property damage and reduces business interruption. Ensure your business has a comprehensive written emergency response plan for extreme weather events, including high winds and flood. A good plan has the support of senior management, site-specific recommendations and clear delineation of responsibilities.
2. Test and update business continuity plans annually: The crucial role of business contingency plans has become more apparent as a result of recent natural catastrophes. Superstorm Sandy hit the Northeast on a Monday, which made it difficult for employees to develop and implement business contingency plans while preparing their homes and families for the storm. A well-developed contingency plan provides businesses with the tools to get back up and running as quickly as possible.
3. Understand your insurance policy: Business owners should take the time to read their current policy and discuss with their brokers what is covered and where there may be gaps. Determine if the limits of liability are in line with the current dollar value of the cost to repair or replace the damage. Consider adding an extended period of indemnity clause to the business interruption coverage to support the business until it returns to its pre-loss financial condition.
4. Know what to prepare for: Planning for a wind event involves different preparation than planning for flooding. In the case of Superstorm Sandy, the majority of preparation was based on a high wind event, leaving many businesses unprepared for the flooding caused by the storm surge. As more sophisticated tracking models are introduced, more accurate information will be available.
5. Consider making improvements to the building and site: The following enhancements could help your business withstand the high winds and flooding that can accompany a windstorm.

• Emergency generators for loss of power
• Floodgates and flood doors
• Raising critical equipment above highest anticipated flood levels
• Protecting the building ‘envelope’ from high winds (this refers to the physical boundaries between the interior and exterior of a building, such as the roof, windows, and doors). This could include measures such as using impact resistant doors and glass, or providing additional securement of the roof covering system to the roof deck.