Hurricanes, typhoons, cyclones
Tropical storms – The natural hazard with the highest losses
US$ 60bn of which was insured
Tropical cyclones have enormous destructive potential. These storms, which are known as hurricanes, typhoons or cyclones depending on the particular region, account for the highest losses of all natural hazards over time.
Hurricane Katrina, which struck New Orleans in 2005 with a devastating storm surge, remains one of the costliest natural disasters in history – surpassed only by the 2011 earthquake in Japan that triggered a devastating tsunami and the Fukushima nuclear disaster. In the 2022 hurricane season, Hurricane Ian almost broke the record for losses: as one of the strongest hurricanes ever to hit the US mainland, it destroyed assets worth US$ 100bn, of which roughly half were insured.
Tropical cyclones usually develop from the large-scale clusters of thunderstorm cells that are often seen over tropical oceans. They get their energy from the evaporation of surface water with a temperature higher than 26–27°C. When they reach hurricane force (>118 km/h), they are given the name “hurricane” in the Atlantic and northeast Pacific regions, “cyclone” in the Indian Ocean and South Pacific, and “typhoon” in the northwest Pacific.
Tropical storms can be active for several weeks and can stretch across a vast area, while wind speeds can reach more than 250 km/h, in some cases even exceeding 300 km/h. They mainly affect coastal regions and islands between latitudes 10° and 40° north and south of the Equator. After making landfall, tropical storms quickly weaken as they track inland. Despite this, they can still trigger extreme floods and landslides through the enormous water masses they have absorbed while over the warm sea.
In North America, hurricanes are one of the biggest loss drivers for the insurance sector. And wind speed is not the only factor. The storm surges and inland flooding that frequently accompany hurricanes also have a significant impact on the extent of the loss.
In addition to the southeastern US states, the northeastern coast of North America (including Canada) is also vulnerable to hurricanes. Examples include Hurricane Sandy, which resulted in extreme losses across the New York metropolitan area in 2012, and Hurricane Fiona in 2022, which severely impacted the Canadian province of Nova Scotia.
|Costliest typhoons in Japan 2000 – 2022 ordered by insured losses (original values)|
|Name||Year||Overall losses (US$ bn)||Insured losses (US$ bn)|
|Source: Munich Re NatCatSERVICE|
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Are hurricanes and typhoons becoming stronger because of climate change?
Natural climate cycles, such as the warm and cold phases affecting the surface temperatures of tropical oceans certainly influence tropical storm activity, but climate change also plays a role. This is what we currently know:
- Most of the scientific studies indicate that the number of tropical storms will remain virtually unchanged in most ocean regions until the end of the 21st century. However, climate change could lead to an increase in the proportion of severe storms (Categories 4 and 5 on the Saffir-Simpson Scale).
- Precipitation in the “inner core” at the centre of a storm is likely to increase as a result of the higher levels of evaporation resulting from rising ocean surface temperatures. One study indicated that climate change has already significantly increased the probability of extreme precipitation, such as that seen in 2017 in the Houston area during Hurricane Harvey.
- In the case of the extreme rainfall from Typhoon Hagibis in October 2019, researchers also assume that such events have become two thirds more likely to occur because of climate change and that global warming is responsible for some US$ 4bn in additional losses.
- The floods in inland Florida following Hurricane Ian in 2022 are also consistent with this pattern.
Solutions for assessing and managing risks
Preventive measures and better risk management, including improved building standards or more stringent land-use regulations, can limit losses caused by tropical storms and help to protect people. Insurance products are a key component in providing financial support to people, businesses and public services following disasters. In addition, risk-adjusted premiums offer price incentives in return for behaviour that will mitigate losses. In highly developed markets such as the United States, the majority of homeowners, small businesses and industries have insurance cover for storm damage.
But it is a different story with the flood risk: the insurance gap here is considerable, with only a relatively small proportion of material assets covered for flood damage. This is also the case for flood damage triggered by storm systems.
In developing and emerging countries, the insurance gap for direct storm damage is often close to 100%. Munich Re is involved in developing practical solutions in this context, in organisations such as the Insurance Development Forum, and as part of public-private partnerships. The aim is to improve loss prevention in low-income countries and enhance their ability to cope with catastrophe losses.