Toolkit: tropical cyclones – surviving the storm

Across the world, tropical cyclones are known by a variety of names: hurricanes, typhoons or cyclones, depending on where these powerful storms occur. But regardless of what they're called, these rotating storms share common features like strong winds, heavy rain and the potential to do tremendous damage. They typically form over warm tropical waters, drawing their energy from the heat and moisture fluxes from the ocean's surface. 

As a re/insurer, we provide our clients with unique risk perspectives and tools, offering a deep understanding of threats from tropical cyclones and the ability to transform data into meaningful, tailored insights. We also provide models that support better risk management, mitigation, and response through a multi-stakeholder approach. 

Find out how we can help you assess tropical cyclone risk, enhance resilience, and protect your portfolio, business, or society.

Hurricanes are the most expensive and among the deadliest natural perils in North America, posing a major threat to people, businesses and essential infrastructure in coastal regions that have often been a focal point for population growth over the past 50 years.  

Typhoons in the Asia-Pacific region also have a dramatic impact, producing tremendous loss of life, as well as property damage.  The most-expensive insured loss typhoons have all occurred in Japan, where there are high property values and strong insurance penetration. Some of the deadliest typhoons have occurred in less developed countries, where there may be less rigorous building codes and where residents may be unable to evacuate ahead of approaching storms.

The effect of climate change on North Atlantic tropical cyclone frequency is at this time uncertain. But increasing sea surface temperatures are believed to have the potential to increase hurricanes' intensity, thereby lifting the average intensity of hurricanes and potentially boosting the number of major hurricanes. 

Climate change is expected to increase storm surge-driven coastal flooding due to sea level rise and increasing tropical cyclone intensity, as well as rainfall from tropical cyclones that results from increasing atmospheric water vapor content. In addition to traditional insurance coverages, governments can consider public-private partnerships that can provide innovative solutions. These include incentivising individual purchase of insurance or government-backed programs to help whole regions recover more quickly than if coverage were absent. 

It is clear that increasing hurricane-related economic losses are the result of increased development in coastal areas impacted by hurricanes and where property development has  outpaced adaptation measures meant to gird communities against storms. Thoughtful planning of communities can help reduce exposure, as well as ensure the preservation of important natural features that help absorb flooding that accompanies tropical cyclones. 

Globally, more than 80% of economic losses from flooding are uninsured. When hurricanes make landfall, the resulting flooding often causes a large percentage of the economic losses. Flooding is a growing concern, as well, given likely increases in storm surge and rainfall expected with climate change. Progress in expanding flood insurance protection will support adaptation measures needed to address the effects of climate change. 

While traditional risk models relied heavily on long-term historical activity rates, potentially underestimating hurricane risk, today's models are becoming increasingly adept at incorporating climate change trends.

Reinsurers have an important role to play as a “shock absorber” against large risks such as tropical cyclones, but in today’s constantly evolving world, we are much more than that. Beyond financial support, reinsurers contribute expertise in risk identification, assessment and modelling to help insurers understand accumulation threats and enhance resilience that ultimately flows to the consumer. 

Today insurers need granular data, advanced modelling, and the next level of risk knowledge to build a 360-degree view of their portfolio and to better understand their exposure to tropical cyclone risk. With CatNet®, Swiss Re’s tool for assessing global catastrophic risks, our clients can access high-resolution, accurate datasets that span the entire planet. They can view multiple tropical cyclone models on a single platform, leading to more comprehensive risk assessments.

Find out more about our offerings across risk transfer and technology solutions:

Our Risk & Data Services platform helps companies build a digital twin of their assets to get an accurate overview of exposure. The RDS Property Exposure Management solution gives risk managers insight into their property portfolio exposure to tropical cyclones. A multinational utility company, for example, uses the tool to identify which power generation assets are most exposed to natural hazards such as floods, storms, or wildfires.

The world must learn from the past and continue to prepare for tropical cyclone occurrences. Future-proofing society requires a multi-stakeholder approach, as no single entity can address these complex issues alone. Insurers and reinsurers’ expertise can be a catalyst for conversation and change, helping the public sector better understand exposure, allocate resources effectively, and develop proactive mitigation strategies.