June 7, 2021 by Jason Contant
Canada could see heightened hurricane risk in the future, as climate change and fluctuations in ocean temperature are increasing the likelihood of stronger hurricanes making landfall further north, according to Swiss Re.
“We see an increased likelihood of intense hurricanes making it further north, eventually making landfall at higher latitudes,” Dipika Deol, head of P&C treaty underwriting at Swiss Re Canada & English Caribbean, said in an interview. “The more intense [hurricanes] are, the farther they can travel as well.
“So, if these larger hurricanes can travel farther, there is a much higher probability of them actually impacting Canada. In our view, it truly is a case of when, not if, a hurricane will impact Canada.”
Canada has already seen the effects of hurricanes and post-tropical storms. Most recently, in 2019, Hurricane Dorian made landfall near Halifax as a post-tropical cyclone, with wind and flood damage causing US$154.35 million in economic losses in 2021 dollars (US$122.15 million in insured losses). In 2010, winds up to 150 km/h and heavy rains and flooding in Newfoundland from Hurricane Igor cost US$245.56 million in economic losses in 2021 dollars (US$56.13 million in insured losses).
Climate change and the Atlantic Multidecadal Oscillation (AMO) phenomenon are contributing to increased hurricane risk in Canada, said Deol, who discussed the topic with Canadian Underwriter last week. AMO is characterized by fluctuations in ocean temperatures, phases that occur approximately every 25 to 40 years. AMO impacts the frequency of the major hurricanes that develop over the Atlantic Ocean.
“Since 1995, we can see that the ocean temperatures in the Atlantic Ocean have been warmer than average between Africa and the Eastern Caribbean,” Deol said. “What that has given us is a much more hyperactive hurricane season” in the years of 1995, 2004, 2005, 2008, 2010, 2017 and 2020.
Last year, it was predicted that there would be an above-average frequency of storms, “and indeed that did play out,” Deol said. A record of 30 named storms, 12 of which made landfall in the United States, was seen last year.
Losses were “fairly moderate,” largely due to the fact that they hit areas that were not as highly populated, Deol said. “What we’re going through in 2021 is also an expectation that this year’s hurricane session is going to be above average because of the higher ocean temperatures.”
The Canadian Hurricane Centre also predicts an active season in 2021. “We’re pretty confident to say it won’t be as active as 2020, but it will be more active than the 30-year average,” meteorologist Bob Robichaud told The Canadian Press last month.
Atlantic Canada has historically seen the greatest impact from hurricanes (particularly the provinces of Newfoundland and Labrador, Prince Edward Island and Nova Scotia). Although the region is not as heavily populated as other areas of the country, its population has been growing. This is especially true during the pandemic, where there has been a surge of people moving from Ontario and Quebec, in particular, Deol said. And with this population surge, potentially more people are in harm’s way.
“When we think about the size of these hurricanes, they form over the ocean and as soon as they hit land, it’s a bit of a breaking mechanism,” Deol said. “There is a little bit of a limit as to how far inland they can come.” However, the bigger the hurricane, the more speed it gathers and the farther it will be able to travel inland.
People who have just relocated may also not have the same historical knowledge of the area they’ve moved to, Deol said. “So, they may not have scrutinized their policies adequately to make sure they have the right coverage.”
She added there is “good cause” for clients to go through their flood coverage in more detail to make sure they understand what is covered. “Obviously, the time to find out your coverage issues would be before an event happens, not after.”
For example, while a big part of hurricane risk in Canada, the flood component is not necessarily covered to the same extent across a variety of policies, whereas wind is. “It could be you have an endorsement that’s simply called ‘water’ and not overland, so it does require… asking questions of your insurer to really understand.”
As for AMO oscillations, Swiss Re uses its own proprietary models to take a shorter-term view of the risk, which “doesn’t seem to match with a lot of industry players at the moment,” Deol said. “When it comes to the hurricane risk, we believe it is truly inexplicable that many industry players have switched to a longer-term frequency perspective, while this AMO status continues to point to an above-average frequency for storms for some time to come. If you take a longer-term view of this AMO and the ocean temperatures, you’re going to miss out on the peak that we are seeing.”
Feature image by iStock.com/MikeMareen