Hurricane experts say calm 2006 was "only a respite"

Updated 11/22/2006 5:36 PM ET

NEW YORK (Reuters) — The 2006 hurricane season is ending on Nov. 30 with U.S. homeowners and insurers unscathed, but forecasters warn that the years ahead will not be so calm.

While the first predictions for 2007 are due in early December, Risk Management Solutions, a firm that models damages from hurricanes, sees annual storm losses for the next five years rising 40% in the U.S. Gulf and up to 30% in the Atlantic.

"2006 was only a respite," said Robert Hartwig, chief economist of the Insurance Information Institute. "The trend is for more hurricane activity, not less."

Insurers are awaiting a first look at the 2007 season, which starts June 1 and ends Nov. 30, from Colorado State University hurricane forecaster William Gray and his team on Dec. 8. The Climate Prediction Center of the National Oceanic and Atmospheric Administration is due to give its end-of-season report on Nov. 30.

Forecasters were wrong in 2006, unanimously predicting an above-average season for hurricanes based on warmer-than-usual Atlantic waters that often fuel hurricanes.

But wind patterns and dust storms in the Sahara squelched tropical disturbances before they started, forecasters said. As a result, there were only nine storms that got names this year. That compares with 28 in 2005, including the trio of Katrina, Rita and Wilma that caused more than $100 billion in losses.

One season does not set a trend, however. "Yes, we got off easy, but our expectation is that 2007 will be another tough year," said Robert Blumber, a managing director in Marsh Inc.'s global property group, a unit of Marsh & McLennan Cos. Inc., the world's largest insurance brokerage firm.

Insurance premiums for catastrophe-exposed areas such as Florida have gone up by 50% to 100% in some areas. Deductibles, the amount an insured pays before coverage kicks in, have risen to 5% from 2% in past years, Blumber said.

This has as much to do with growth in storm-ridden areas as the weather itself, according to companies who predict what future catastrophe losses could look like.

"Florida's population is growing by 2% a year," said Tom Larsen, a vice president with Eqecat Inc. As a result, the disaster modeler sees the loss potential in the Sunshine State doubling every 15 to 20 years.

Risk Management Solutions said its view that damage will be 40% higher in 2007 to 2011 is based on comparison to its statistics compiled starting in 1900.

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