Hurricane Beryl now earliest Atlantic Cat 5 storm on-record. Cat bonds still in focus

Hurricane Beryl caused significant impacts to some of the Caribbean Windward Islands yesterday and after passing that island chain resumed its intensification, recently being upgraded to a Category 5 storm with 165 mph sustained winds, the strongest hurricane this early in the year on-record for the Atlantic basin.

Meteorologists say it is an ominous sign for what is forecast to be a very active 2024 Atlantic hurricane season, with hurricane Beryl an example of the ample warm water fuel available for storms to form and intensify.

Beryl has broken numerous records now, with those same meteorologists pointing to the fact the waters in the Caribbean are at temperatures more normally seen in September already and that the kind of activity seen with hurricane Beryl is more typical of peak hurricane season.

Beryl was already known to be the the earliest category 4 Atlantic hurricane on record and also the first major hurricane east of the Lesser Antilles on record for June.

It was being cited as an extremely rare occurrence for this time of the year and now having intensified further to Category 5 becomes even more so.

Major hurricane Beryl is still strengthening as well, having been upgraded to Category 5 with sustained winds of 160 mph at 03:00 UTC today, but then a further update at 06:00 am UTC now puts the storm at 165 mph sustained winds.

Beryl’s minimum central pressure has deepened significantly now to 935mb, while hurricane-force winds extend outwards up to 40 miles from the center and tropical storm force winds up to 125 miles.

The map below is from Tomer Burg’s excellent resources (click it for the very latest version).

The NHC said, “Beryl is a category 5 hurricane on the Saffir-Simpson Hurricane Wind Scale. Fluctuations in strength are likely during the next day or so, but Beryl is expected to still be near major hurricane intensity as its moves into the central Caribbean and passes near Jamaica on Wednesday. Additional weakening is expected thereafter, though Beryl is forecast to remain a hurricane in the northwestern Caribbean.”

For Jamaica, hurricane Beryl is currently forecast to near the island with slowly weakening sustained winds of 120 mph to 110 mph.

Beryl is forecast to pass slightly to the south, so Jamaica’s World Bank issued catastrophe bond, the $150 million IBRD CAR Jamaica 2024 transaction, will be watched closely, as should Beryl move any nearer that cat bond could be considered at some risk of triggering and even a partial payout.

It’s important to note that hurricane Beryl would need to make a closer approach than the forecast models currently suggest, but there is time for that to happen. So Jamaica’s cat bond will be on-watch for the insurance-linked securities (ILS) market over the next day or so.

Beyond Jamaica, hurricane Beryl is still forecast to continue weakening and to reach the Yucatan peninsula of Mexico as a strong Category 1 storm.

At that level of intensity, hurricane Beryl would not be expected to pose a significant threat to Mexico’s Atlantic coast hurricane catastrophe bond, another World Bank issuance (a $125m Atlantic hurricane tranche of the IBRD CAR Mexico 2024 deal). It would require Beryl to maintain greater intensity, for that cat bond to be triggered, we believe.

It’s worth noting here, that Beazley’s December 2023 $100 million London Bridge 2 PCC Limited (Fuchsia 2023-1) catastrophe bond also carriers Caribbean hurricane exposure, including for the just affected St Vincent and the Grenadines, as well as Jamaica.

The Fuchsia 2023 catastrophe bond would attach at $500 million of losses to Beazley and it’s worth noting that Caribbean named storm exposure only contributes a tiny 0.61% of the expected loss of the cat bond notes, suggesting it would need to be a historica hurricane impacting multiple Caribbean islands for Beazley to take sufficient ultimate net losses to breach the trigger. This cat bond does also provide US named storm coverage, so seems more designed to pick up losses from a storms passage through the Caribbean, but with any US landfall impacts more likely to be responsible for a triggering of it. It is another cat bond to watch though.

Beyond Mexico, Beryl is currently forecast to cross the Yucatan and emerge weakened as a strong tropical storm in the Gulf of Mexico, after which a left turn into northern Mexico is anticipated at this time.

The most at-risk of the catastrophe bonds in the path of hurricane Beryl continues to be the Jamaica issuance, which we understand requires a minimum central pressure of lower than 969mb with a storm that makes a direct hit on the island, or 950mb or lower for a storm that makes a close pass to it.

The current track is further south at this time, but it could move north, in which case it would all come down to intensity and whether hurricane Beryl can maintain those pressure levels after the expected weakening begins.

More broadly, the insurance market will anticipate losses from the Windward Islands, likely regionally retained and by specialists operating there, in the main.

A hit on Jamaica could be a larger insurance market loss, with the potential for some reinsurance coverage to respond, after which a Yucatan landfall and its financial impacts will depend on the location affected.

Beyond Mexico, if the forecast doesn’t change, then the United States may avoid any significant impacts from this historic storm, aside from some torrential rains that could move northwards in Beryl’s wake. Any change in the forecast though, or a more direct route towards the Gulf Coast and that could change dramatically, as the waters there are plenty warm enough to sustain a strong hurricane, although some wind shear may inhibit the chances of a particularly strong storm in the Gulf at this time, some forecasters say.

Track the 2024 Atlantic tropical storm and hurricane season on our dedicated page and we’ll update you as new information emerges.