As this year’s North Atlantic hurricane season is nearing its end, and in the aftermath of the widespread damage caused by hurricane Ian, our new Insurance-Linked Strategies (ILS) whitepaper addresses some of the questions most frequently asked by our investor base in connection with the seasonal occurrence of tropical cyclones, as well as its implications for the ILS market.
The first section of the whitepaper “North Atlantic hurricanes in a warmer climate: What science tells us and what it means for the ILS market” discusses the historical hurricane activity over the last 170 years and the factors through which changes in climate conditions could potentially affect hurricane formation. We review how the available hurricane risk models capture climate drivers across various time horizons and conclude with an assessment of the accuracy of pre-season hurricane forecasts.
The second section shows how the observed hurricane activity correlates with actual insured losses, which are the main driver of ILS returns. We close the paper with a discussion of the 2022 hurricane season and a market outlook for the asset class.