Climate-sensitive industries account for one third of U.S. GDP, or $9.4 trillion, according to the National Oceanic & Atmospheric Administration (NOAA). Applying that to the world is $33 trillion of exposure risk for insurers.
The U.S. dodged a bullet in 2023, with $93 billion in weather related damages from a record number (28) billion-plus dollar events. While the 2023-dollar damages were down from -48% from 2022 and -33% below the 10-year average, that changed in 2024. Just about every weather peril is up in 2024, with the number of tornadoes and wind events being the most in 13 years and in the top 3% of recorded history.
The earliest Category 5 Hurricane in 175 years of U.S. hurricane records ultimately made a U.S. landfall southwest of the Houston metro area, with wind and major flooding damage. In February 2024, West Texas experienced the worst wildfire in recorded Texas history, with over a million acres burned. And now, we await what everyone expects to be a very active Atlantic Basin-core hurricane season.
Weather Trends has year-ahead global weather forecasts by week across every mile on Earth, employing a statistical, 24-climate cycle approach to the science of meteorology and climate forecasting. These very specific forecasts don't change once issued, making weather risk assessments for businesses more actionable.
Traditional meteorology is physics-based and limited to short-range 14-day outlooks. Others use some oceanic and atmospheric climate indices for an "analog" approach, where current cycles are compared to past history to make a seasonal forecast, but these often lack specifics to be actionable for business or insurance applications, or they're too vague.
Examples of long-range 2024 forecasts include:
1) The most active tornado/wind season in 13 years (since the record year of 2011) and top 5% of U.S. history.
2) Floods more like 2019 and 1993, with a forecast up +52% over last year. This happened in the Northeast, Midwest Rivers and East Texas, amongst other areas. Weather Trends forecasted the Upper Midwest to have the wettest spring in 5 years and the 2nd wettest in 40 years, with high-risk flooding. NOAA's month-ahead forecasts implied a 33% chance of above average rainfall, but this usually does not quantify the forecast to make it actionable for weather risk management groups.
3) Wildfires: the most in four years, +168% over last year. This happened with the TX fire, and now the fires are rapidly developing in the Western U.S.
4) Hurricane season: the most damaging in seven years, with expectations of the 3rd most active season in 175 years, with high risk to Texas. Hurricane Beryl hit the Houston area, with the worst flooding since Hurricane Harvey in 2017.
These events were predicted months to a year ahead with specificity that allows insurers and risk managers to make actionable decisions on things like:
1) Should they take on more exposure in Texas in 2024 with an already high Texas exposure risk? The answer, based on Texas being at a very high risk for multiple perils, was no. The high risk to Texas allowed a property and casualty carrier to get reinsurance to help offset their already high exposure in the state. This one simple low-risk, high-reward decision came from knowing specifics about the weather forecast and an assessment of past claims payout due to weather events.
2) In 2023, many insurance carriers were hit hard by hail damage claims in the Midwest and Great Lakes. This peril was actually forecast to be down -15%. Year-to-date hail cases are down -20% and -8% below average. This is a classic example of how planning a business off last year's results can lead to higher risk planning the following year.
3) Sometimes, media sensationalism can influence businesses to make unjustifiable reactionary decisions based on fear rather than facts. There were a lot of weather companies forecasting a disaster for agriculture insurance coverage, with an extreme drought and endless heatwaves like 2012 and 1988 in the U.S. Corn Belt. Weather Trends' statistics and cycles said the opposite, with the wettest conditions in nine years, coolest in five years, and drought claims down -86%, with record yields leading to plummeting corn prices. The weather has been nearly perfect in the U.S. Corn Belt, with corn prices plummeting from $8.16 Bu/Ac highs in 2022 to $3.90 today and nowhere near the record highs of 2012 at $8.50 Bu/Ac.
Retailers, seasonal suppliers, financial services and agriculture have been embracing services like Weather Trends for years to better plan long-lead decisions, like how much inventory to buy, where to allocate more or less in the optimal forecast weather, when to promote or advertise in the right weather, and assessments on how equity stock prices will perform quarters ahead. Insurance firms are starting to embrace this concept of proactive versus reactive planning but at a slower adoption rate, from our experience.
Part of this is just past experience using traditional physics approaches offered up by governmental agencies that typically have low skill.
An unfortunate trend we've experienced dealing with the insurance industry is fraud in the claims reporting process related to hail damage. Many have received pitches from roofing companies claiming there was hail damage and thus were eligible for a new roof. They use National Weather Service storm warning reports and radar images that said hail was possible on a given day, but in reality, very few actually observed hail or damage from that event. Roofers find hail damage that may have been from years prior and get a claim processed and approved using these NOAA warnings.
2025 will see a dramatic shift from flooding, convective, severe weather, to drought, wildfires, winter auto accidents, and another intense hurricane season.
