2018 Storm Season Could Yield 5 to 9 Hurricanes

What’s Going On?
Scientists at Colorado State University anticipate above-average probability of a major hurricane making landfall along the continental United States coastline and in the Caribbean this year.

Similarly, the National Oceanic and Atmospheric Administration (NOAA), in its annual forecast, predicts 10 to 16 named storms, of tropical strength or higher, during the 2018 hurricane season which extends over the six month period from the June 1 to November 30. Of those, 5-9 storms could become hurricanes with winds of 74 mph or higher, and 1-4 may become major hurricanes with winds of 111 mph (179 kilometers per hour) or more.

Why Does It Matter?
Every single one of these storms threatens people, real estate, crops, livestock, energy resources, and public infrastructure in the Caribbean, the U.S., and Mexico. Over 80 million people are located between the Atlantic coast and Gulf coast, and more than 6.6 million homes with an estimated reconstruction cost of $1.5 trillion, according to the Insurance Information Institute.

Moreover, hurricane season is closely watched by markets because the Gulf of Mexico area is one of the most important regions in the world for energy resources and infrastructure. Per the Energy Information Administration, about 5% of U.S. natural gas and 17% of crude comes out of the Gulf of Mexico. The hurricane-vulnerable coastline also accounts for 45% of U.S. refining capacity and 51% of gas processing.

Devastating Costs
The Caribbean is one of the most disaster-prone regions in the world, and island states can suffer the fiscal and economic wounds left by severe tropical storms for many years after the event.

Six of the tiny eastern Caribbean micro-states rank in the top-10 most disaster-prone countries globally, and all the countries in the region are in the top 50, according to Moody’s. Tropical storms and floods cost them the equivalent of over 2% of GDP every year.

An average hurricane season produces 12 named storms, of which 6 become hurricanes, including 3 major hurricanes. Last year proved to be costliest year on record, with more than $215 billion in sustained damages. The 17 named storms that formed in 2017, were in line with NOAA’s prediction of 11 to 17 storms.

Investor Takeaway
Infrastructure companies tend to benefit in the wake of big storms because reconstruction is often needed. Cement companies, construction companies, suppliers of nails, lumber, and other building materials & equipment are in demand as well.

The tourism industry, an important source of revenues in the Caribbean, will likely suffer following a hurricane. Insurance companies also take a hit since they have to pay out claims submitted by people whose insured property and goods were damaged. Re-insurance companies (companies that insure the insurance companies) can take an even bigger hit when the insurance companies themselves file reimbursement claims.


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