Return of La Niña boosts chances for intense Atlantic hurricane season

An active hurricane season, marked by the return of La Niña, presents another challenge for Florida personal lines insurers already dealing with inflation and claims costs.

The 2024 Atlantic hurricane season, which runs from June 1 to Nov. 30, has an 85% chance of producing an "above-normal" number of named storms, according to the National Oceanic and Atmospheric Administration (NOAA). AccuWeather and Colorado State University's Department of Atmospheric Science also expect an above-average season.

NOAA is forecasting 17 to 25 total named storms, with eight to 13 expected to become hurricanes, defined by winds of 74 mph or higher. Four to seven of those predicted hurricanes will be major, Category 3, 4 or 5, packing winds of 111 mph or higher.

Colorado State researchers predict there is a 34% chance of a major hurricane making landfall on the US East Coast and a 42% chance of one striking along the Gulf Coast. Researchers expect 2024 hurricane activity to be about 170% of the average season from 1991 to 2020.

The prospect for an active season "adds insult to injury" for insurers in the state, particularly regional carriers such as Heritage Insurance Holdings Inc. and Universal Insurance Holdings Inc., said CFRA Research analyst Cathy Seifert, adding that those regional carriers are at risk of "going under" should the forecast for the season prove accurate.

"It could turn out to be a very expensive summer for a lot of insurance carriers, and because the industry still has pricing power, it could mean an expensive summer for homeowners, business owners and property owners," Seifert said in an interview.

Randomness and reinsurance

Forecasters have been good at predicting storm activity in past seasons, but Keefe, Bruyette and Woods analyst Meyer Shields said there is an "element of randomness" in predicting actual losses.

Shields said an example of this "randomness" is the 1992 hurricane season, when there were only six named storms. Four of those storms developed into hurricanes and only one made landfall.

That one hurricane was Hurricane Andrew, which slammed into Dade County as a Category-5 storm and devastated South Florida. Insured losses totaled $16 billion, or $35 billion in 2023 dollars, resulting in the insolvency of 11 insurance companies.

Despite the uncertainty of predicting the weather, Shields said reinsurers will keep forecasts in mind as they prepare for the June 1 renewals.

"[Reinsurers will] keep [the forecasts] in mind and won't be anxious to sacrifice the much-improved pricing and terms and conditions we've seen over the past couple of years," Shields said in an interview. "I think we're not likely to see companies say, 'The forecast is bad, we're not going to write anything.'"

Of the 19 named storms in the 2023 season, only one made landfall as a major storm: Hurricane Idalia, which hit Florida's "Big Bend" area as a Category 3 storm on Aug. 30. Aon PLC reported $2.3 billion in US hurricane losses in 2023.

El Niño giving way to La Niña

Unlike 2023, when the presence of a strong El Niño and its vertical wind shear inhibited storm intensity levels, the upcoming season will mark the return of La Niña, which will allow stronger storms, said Alex DaSilva, AccuWeather's lead hurricane forecaster.

"When we move into a La Niña phase, we typically see a reduction in wind shear across the Atlantic Basin," DaSilva said in an interview. "So, if there's a reduction in wind shear overall ... that can allow more storms to develop during the hurricane season."

When those storms develop, the warm sea surface temperatures, which DaSilva said are at the highest levels he has seen, can turn a storm into a monster.

"It's not only the sea surface temperatures," DaSilva said. "It's also the water as you move several hundred feet down in the ocean, where it's still very warm, so that's just more and more fuel for the hurricanes."