Hurricanes, typhoons, cyclones

Tropical storms – The natural hazard with the highest losses

US$ 2,100bn

Losses caused by tropical cyclones worldwide 1980-2023
US$ 790bn 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.

Take Hurricane Otis, for example, which devastated the vacation destination Acapulco on the west coast of Mexico in October 2023. With wind speeds of up to 265 km/h, it was one of the strongest tropical storms to have ever made landfall. Hurricane Ian caused devastation to the mainland US just one year prior. Leaving damages amounting to US$ 100bn in its wake (roughly US$ 60bn of which was insured), Hurricane Ian became one of the most expensive natural disasters of all time. It is Hurricane Katrina, however, that currently holds the title of the most expensive hurricane of all time. Hurricane Katrina hit New Orleans in 2005 and the damage it caused is surpassed only by that caused by the earthquake in Japan in 2011 with its devastating tsunami and the nuclear catastrophe at Fukushima.

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 Japan and in the southeastern coastal regions of the United States, the high concentration of assets means that typhoons and hurricanes often cause losses running into the billions of dollars. In developing and emerging countries, by contrast, extreme tropical storms generally trigger humanitarian disasters with significant loss of life. The insured proportion of the losses incurred is often extremely small in these regions. Cyclone Freddy, for example, made landfall in Madagascar in 2023 after first having spent five weeks crossing the entire southern Indian Ocean headed west from Australia. The cyclone bounced back and forth between Madagascar and Mozambique, making landfall multiple times and bringing devastation in its wake.

Hurricanes are one of the biggest loss drivers in North America ...

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.

... but Japan has also been affected by severe typhoons in recent years

Costliest typhoons in Japan 2000 – 2023 ordered by insured losses (original values)
Name	Year	Overall losses (US$ bn)	Insured losses (US$ bn)
Typhoon Jebi	2018	18.2	13.0
Typhoon Hagibis	2019	17.0	10.0
Typhoon Faxai	2019	9.1	7.0
Typhoon Songda	2004	9.0	4.5
Typhoon Trami	2018	4.6	3.5
Source: Munich Re NatCatSERVICE

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Are hurricanes and typhoons becoming stronger because of climate change?

The eye of a hurricane can measure up to 60 kilometres.

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).
Most weather experts also expect to see a shift towards storms accompanied by extreme precipitation. Experts also point to climate change as the factor behind the rapid intensification of tropical storms. Hurricane Otis and Typhoon Doksuri from 2023 fit this description. Hurricane Otis grew from a simple tropical storm to a hurricane of the highest category within 24 hours. Typhoon Doksuri brought record rainfall to China, up to 600 litres in only one day in some regions, which led to extreme flooding.
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 natural climate pattern ENSO (El Niño/Southern Oscillation) in the Pacific Ocean also has a strong effect on storm activity, impacting extreme weather events practically around the globe. The two ENSO phases, El Niño and La Niña, which occur in a rhythm of several years, work in opposing ways: While El Niño phases tend to bring fewer hurricanes to the North Atlantic and more typhoons to the Northeast Pacific, this pattern reverses during La Niña phases. Experts expect an above-average number of hurricanes in 2024 due to a likely La Niña phase coupled with very high water temperatures in the North Atlantic.
The floods in inland Florida following Hurricane Ian in 2022 are also consistent with this pattern.

More about tropical cyclones

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.