Hurricane Hermine will break Florida’s hurricane drought

Updated 15:00 ET: Invest 99L, or tropical depression 9, which we’ve been tracking for over a week reached tropical storm status and has just been upgraded to Hurricane Hermine by NOAA. The storm, which is tracking towards the Florida panhandle, is forecast to remain a hurricane until landfall, breaking Florida’s ten plus year hurricane drought.

Wilma in 2015 was the last hurricane to strike the state of Florida, but the latest update from the NOAA put Hermine officially as a hurricane as it heads for a Florida landfall on Thursday night.

Hurricane Hermine is currently situated around 85 miles south-southwest of the Florida panhandle, and is tracking towards that area of the Gulf Coast of Florida at a forward speed of 14mph and with maximum sustained winds of 75mph, higher gusts and a minimum central pressure of 988mb.

Hurricane Hermine track and forecast path

With the forecast now showing hurricane Hermine at landfall, this is the first hurricane threat to Florida that the reinsurance, ILS and catastrophe bond sectors have had to take serious notice of in a number of years.

Hurricane storm force winds extend outwards up to 45 miles from the center of Hermine and tropical storm force winds around 185 miles. Some additional slight intensification is forecast as Hermine crosses the warm Gulf coastal waters and approaches the Florida panhandle coastline later tonight.

Threats to Florida include hurricane force winds where Hermine makes landfall, with strong tropical storm force winds over a wide area. A hurricane warning is in effect from Suwannee River to Mexico Beach with tropical storm warnings in effect across a wide swathe of the Florida panhandle, Bend and Gulf Coast area.

Hermine hurricane and tropical storm warning areas - Source: Weather Underground

With Hermine now forecast to be a hurricane at landfall wind damage becomes increasingly likely the stronger and larger the storm becomes. With some hours left to landfall Hermine could even reach strong category 1 hurricane status. Hurricane conditions are expected to reach the coast within the warning area tonight, with tropical storm force winds spreading far along Hermines path.

Torrential rainfall will be an issue, with localised flooding possible as well. NOAA forecasts storm total rainfall amounts of 5 to 10 inches across parts of northwest Florida through Friday, with isolated maximum amounts of 20 inches possible. Some coastal areas of Georgia and the Carolinas are also expected to receive storm total rainfall of 4 to 8 inches, with local amounts of 10 inches possible through Saturday morning, NOAA explains, with flash flooding a possible issue.

Storm surge is an issue with any tropical storm and as Hermine now makes hurricane status the expectation is that coastal inundation will be a problem, particularly due to the low lying nature of the Florida Gulf Coast region.

“There is a danger of life-threatening inundation within the next 12 to 24 hours along the Gulf Coast of Florida from Indian Pass to Longboat Key,” NOAA says, with storm surge heights from 1 foot upwards expected across a wide area, with as much as 6 to 9 feet forecast between the Ochlockonee River to Yankeetown. You can see the areas under threat on this NOAA map.

So hurricane Hermine is expected to strike the Florida Gulf Coast on Thursday night as a Category 1 storm, the intensity of which is still uncertain. Hermine is then forecast to pass close to Tallahasee and head into Georgia, then through the Carolinas where subtropical characteristics will be seen. One thing is certain, Hermine will leave torrential rainfall with resulting flooding in its wake as it heads northeast.

If Hermine turns offshore and gets back over the Atlantic waters off the Georgia or Carolinas coastline sea surface temperatures in that region could mean the storm can regain or maintain some strength, following its passage across Florida, further impacting the southeast coastline. Some forecasts now show a strong extra-tropical Hermine off the eastern seaboard causing a risk of storm surge onto coastal areas in New Jersey, something to watch out for later in the weekend.

Whatever the path, a Category 1 hurricane and subsequent strong tropical storm carrying torrential levels of rainfall that impacts the whole of that area of the U.S. southeast and eastern coastline will result in a greater level of insurance and reinsurance impact, than just a Florida hurricane hit alone.

So Florida’s 11 year hurricane drought is set to be broken tonight, with the resulting expectation for insurance and reinsurance losses heightened depending on how much Hermine can intensify in the coming hours.

Florida is ground-zero when it comes to catastrophe bonds and insurance-linked securities (ILS) funds, with exposure to Florida named storms and hurricanes still the dominant peril across the entire cat bond, ILS and collateralised reinsurance market.

However, if Hermine can only strengthen to the models current forecasts, becoming a Cat 1, it is unlikely that any exposed catastrophe bonds would suffer as a result of the storms landfall. But if Hermine can intensify further in the short time left over the warm Gulf waters, there could be much greater impact to ILS and cat bond positions.

At the moment that does look like a less likely scenario, with a category 1 hurricane Hermine landfall seen as the most popular prediction right now.

But reinsurance contracts will certainly be exposed, with some ILS funds and collateralised reinsurance vehicles likely to pay for at least a portion of any losses due to any hurricane striking Florida these days, thanks to the growth of the ILS market and its penetration into Florida’s insurance and reinsurance market.

Given the concentration of ILS capital exposed to Florida property catastrophe risk, it seems impossible to believe that ILS funds would emerge completely unscathed from any major storm hitting the state.

Complacency when the ILS market has such high penetration into Florida property catastrophe risk is not a good strategy. Even a category 1 hurricane could still cause an insured loss in the high hundreds of millions to north of $1 billion, resulting in reinsurance claims with ILS funds or structures potentially paying some portion of the final bill.

Read our later article ‘Storm Hermine losses expected to be manageable.’

We’ll update this page and post again should the situation change dramatically over the course of the day.

You can track Hermine over on our 2016 Atlantic Hurricane Season page.