RMS HWind: Advances in real time hurricane guidance and forecasting

As we move into the third month of the current hurricane season in the tropical North Atlantic, it has been a busy start with a record nine named storms to date. Thankfully, none of these events have been particularly intense or damaging, but this may change as the season reaches its climatological peak.

Many of the latest forecasts continue to suggest that warmer-than-average sea surface temperatures will persist and La Niña conditions emerge during this peak season, creating favorable conditions for above-average tropical cyclone development and intensification.

All (re)insurers, brokers, and capital markets entities with hurricane exposure or risk monitor the tropics in some capacity, wanting to know the implications of the next impactful event.

RMS has helped clients manage their risk during hurricane events in the North Atlantic for almost 20 years, with a comprehensive set of event response products and services from pre- to post-landfall including qualitative event summaries, accumulation products, and loss modeled tools.

RMS built on this capability when acquiring HWind in 2015, and subsequently bringing to market observation-based products and insights to help clients understand tropical cyclone wind hazard. And since 2019, real time forecasts are a now a growing part of the RMS HWind offering.

Why all the focus and investment in this space? Because real time hurricanes can significantly impact a company’s financial, operational, and sometimes overall solvency state. They can even reshape the market.

For 2020, the HWind forecasting solution has been expanded further to help the market to gain insights throughout an event, so (re)insurers can make timely, informed decisions. These decisions, and the insights that inform them, often start before the storm makes landfall. Companies try to determine potential hazard and loss impacts to exposures at risk and the corresponding uncertainties therein to help answer questions like:

• Could this event impact our business? If so, how much exposure and exposed limit is at risk? Which policies, contracts, and exposures are at the most risk?
• What are the potential losses to my book(s) or cedant book(s)? What is the uncertainty in those losses? How confident am I to report on the event and forecast impacts on my portfolio internally or externally?
• How many claims adjusters will we need? Where do we send our adjusters in advance on the event to position them most efficiently to start the post-event claims work? Will they be safe?
• Do we need to purchase additional reinsurance?
• Do we adjust our underwriting guidelines based on the forecast?
• What does this mean for the cat bonds and/or ILWs I have in place?

These are critical decisions, involving real money and real resources. And in many cases, we have seen that company reputations can be on the line, as a poor response can be viewed as a proxy for weak internal processes.
 

Taking advantage of forecasting solutions

For those with pre-landfall event response processes, now is the time to ensure you are utilizing real time hurricane forecasting information such as HWind that provides timely insights when you need it most. This can make the difference between an average response and a market-differentiating response where you feel confident you are making the best, informed decisions over time.

Launched in 2019, the first foundational version of the HWind forecasting solution for Atlantic events offered a product suite including a set of forecast tracks, track and gust probability metrics, and individual wind hazard and wind loss-producing scenario footprints for the following five days.

These products were developed twice per day using a combination of real time track forecasts from domestic and international weather forecast models, observation data-based insights from HWind, and the RMS North Atlantic Hurricane Models modeling framework. For 2020, we have now expanded the HWind forecasting framework to include the following notable updates, among other enhancements:

Collectively, the HWind forecasting product updates expand the amount of information that can be discerned about potential track, hazard and loss impacts during an active event. The corresponding analytics and insight support a variety of pre-landfall event response applications, including the ability to:

• Understand forecast track, timing, intensity, and uncertainty across multiple forecast scenarios, starting up to five days before landfall
• Quantify exposures, exposed limits, or policies at risk
• Quantify potential industry or portfolio losses, downtime, and other asset impacts based on the same hazard, vulnerability, and financial estimation framework as implemented in the RMS North Atlantic Hurricane Models

Event response teams can use these tools to derive timely insights and support many decisions in advance of landfall, including internal and external reporting, securing and appropriately positioning claims adjusters and other recovery assets, planning policyholder outreach, and evaluating real-time, or ‘live’ catastrophe coverage, cat bonds, or ILWs.

Equally important to ensure proper preparation measures is the need to communicate uncertainties around these decisions. That range of uncertainty may be higher this season due to the ongoing coronavirus pandemic causing reduced air traffic, which in turn reduces the amount of observational data on weather patterns and conditions, leading to a wider range of uncertainty in weather forecasts.

As we gear up for the climatological peak of hurricane season, now is the time for companies to ready themselves and their hurricane event response processes, especially before landfall. If and when tropical cyclone activity escalates and storms begin threatening exposures at risk, it can become a hectic and fraught time for the market. HWind forecasting products can provide the necessary insights to help you stay ahead of the storms and remain proactive, informed, and most importantly, prepared.