Tropical cyclones, encompassing hurricanes, typhoons, and cyclones, are among the most destructive natural catastrophes. These intense storms are characterized by powerful winds, heavy rainfall, storm surges, flooding, and sometimes even tornadoes. The immense scale of damage they inflict on both human life and property is often staggering, particularly in regions with high asset concentrations, such as the southeastern United States and Japan. These countries, with their coastal infrastructure and densely populated areas, are especially vulnerable to the devastating effects of tropical cyclones.
The impact of these storms extends beyond the immediate destruction caused by wind and storm surge. Secondary effects, such as widespread flooding and landslides, often result in prolonged recovery periods. The significant economic losses, including damage to homes, businesses, agriculture, and infrastructure, make tropical cyclones among the costliest natural disasters. Additionally, these storms have far-reaching consequences on local
Where Hurricanes Occur Around the World
Tropical cyclones, though global in reach, are named differently depending on their location. In North America, they are called hurricanes; in the Northwest Pacific region, they are referred to as typhoons; while in Australia and other regions, they are simply termed cyclones. Despite the differences in nomenclature, their destructive power remains the same, and their occurrences are largely confined to tropical and subtropical regions.
In North America, hurricanes typically form over the warm waters of the Atlantic Ocean and the Gulf of Mexico, primarily impacting the southeastern U.S. and Caribbean islands.
Moving to the Southern Hemisphere, Australia experiences its fair share of tropical cyclones. The north-western coast, particularly between Broome and Exmouth, is the most cyclone-prone area. Cyclones here can lead to significant property damage, flooding, and economic disruptions, especially in mining and agriculture.
In Asia, the Northwest Pacific is the most active region for tropical cyclones, with an average of 28 storms per year. Typhoons often affect countries like Japan, China, the Philippines, Taiwan, and Vietnam. Japan, in particular, is highly vulnerable due to its coastal cities and economic hubs.
Hurricane Season in the United State
For the United States, the most destructive hurricanes occur in the Atlantic Basin, which includes the Atlantic Ocean, the Caribbean Sea, and the Gulf of Mexico. The official hurricane season runs from June 1st through November 30th, with the peak period around September 10th. The climatological peak is based on historical storm data, which shows a surge in hurricane activity during this time. After September, the activity gradually tapers off, but a secondary peak in storm frequency occurs in mid-October, particularly in the Caribbean Sea and Gulf of Mexico.
This extended period of storm activity keeps the southeastern U.S. on high alert, as late-season hurricanes have caused severe damage in the past. Coastal regions, in particular, invest heavily in preparedness and early warning systems to minimize the loss of life and economic damage. Yet, despite these efforts, hurricanes like Katrina, Sandy, and Harvey have left lasting scars on the national consciousness, highlighting the vulnerability of coastal communities.
Cyclone Season in Australia
As the North American hurricane season comes to a close, the Australian cyclone season begins, running from November 1st to April 30th. Northern and northwestern Australia are most at risk, with the north-western coast between Broome and Exmouth being hit by tropical cyclones more frequently than anywhere else in the country. According to Australia’s Bureau of Meteorology (BOM), on average, about 11 tropical cyclones form in the Australian region each season.
Caption: Long-term average number of tropical cyclones, using data from the 1969-70 season to the most recent season. Source: BOM.
Australia's cyclone-prone regions are less densely populated than the southeastern U.S., which somewhat limits the economic losses. However, cyclones here still cause extensive damage, particularly to the country's mining and agriculture sectors. In recent decades, improved forecasting and building standards have helped minimize casualties, but the economic toll from property damage, loss of crops, and disruption of industrial operations remains substantial.
Typhoon Season in Asia
The Northwest Pacific sees the highest number of tropical cyclones, with an average of 28 typhoons per season. Typhoons can occur all year round in the Asia Pacific region with more sustained activity from May to November. However, typhoons outside these months are not rare. Typhoon Rai, locally known as Odette in the Philippines, heavily impacted the city of Cebu mid-December 2021.
The sheer frequency of these storms places a heavy burden on countries like Japan, the Philippines, and China. In Japan, coastal cities like Tokyo, Osaka, and Nagoya are particularly vulnerable due to their dense populations and economic significance.
Countries across Asia invest heavily in disaster preparedness, early warning systems, and infrastructure designed to withstand typhoon-force winds. However, the combination of high population density, vulnerable coastal regions, and the unpredictability of these storms continues to make them a formidable threat.
Descartes Protects Clients Globally with Parametric Tropical Cyclone Insurance
At Descartes, we specialize in advanced modeling techniques for tropical cyclone risk, a primary peril in insurance. Our dedicated team of PhDs, natural risk modelers, and data science engineers collaborates to create tailored risk profiles for clients, factoring in their unique assets and locations. Our proprietary cyclone risk model goes beyond traditional approaches by integrating a broad range of data. This includes not only historical loss data and event backtesting but also extensive historical cyclone records and event catalogs. We employ a combination of physical and statistical models to assess wind footprints with precision, simulating over 10,000 physically realistic events informed by the characteristics of the regional cyclone basins.
This comprehensive approach allows us to deliver bespoke structures and innovative capacity solutions, especially for regions most vulnerable to cyclone risk. With parametric coverage, clients can ensure protection from severe losses without the delays associated with traditional claims processing, making Descartes a crucial partner for businesses facing significant storm exposure.
Case Study: Managing Hurricane Risk for the Hospitality Industry
Coastal hotel chains located in hurricane-prone areas face prolonged business interruption (BI) risk from recurring storms. Traditional flood and windstorm insurance options are often limited or come with costly terms. To address this, Descartes offers a "Cat in a Circle" parametric hurricane product, which insures the occurrence of a hurricane within predefined circular zones centered around the insured locations. This product is based on the distance to the hurricane’s track and the wind speed, allowing for precise coverage tailored to the client’s exposure.
Descartes’ custom solution can provide comprehensive protection across multiple hotel properties, with swift payouts triggered by storm events that meet the predefined parameters. This results in affordable and reliable coverage, helping clients mitigate business interruption risks and stabilize premiums, freeing up capital for other operational priorities.
Case Study: "Wind at Location" Insurance for the Japanese Manufacturing Industry
The manufacturing industry in Japan is highly vulnerable to the destructive winds of tropical cyclones. High winds can cause significant structural damage to facilities, disrupt operations, and lead to costly factory shutdowns both during and after the storm. With the "Wind at Location" product from Descartes, we offer parametric insurance to help manufacturers mitigate these risks.
This product offers coverage when a tropical cyclone’s wind footprint impacts the insured location, with payouts determined by the maximum sustained wind speed at the site, as reported by trusted data providers. Clients and brokers can work with Descartes to customize their payout structure to trigger payouts starting at certain speeds, ensuring greater compensation as wind speeds increase. This solution helps protect against physical damage and business interruption, providing financial resilience in the face of Japan’s recurring cyclone threats.
