Severe Convective Storms Causing Costliest Year Ever For Insurers
Triple I Calculates Insurers Losses From These Events Exceeding $50B
Severe convective storms are causing havoc for insurers in 2023. According to a new Issues Brief from the Triple I, 2023 is turning into the costliest year ever for insurers due to these types of storms.
“A $50 billion loss for a single peril is a big deal,” said Steve Bowen, chief science officer, Gallagher Re, who collaborated with Triple-I on its just-released Issues Brief, Severe Convective Storms: State of the Risk. “In fact, the U.S. has had six years since 2010 where all annual catastrophe losses combined did not reach this threshold.”
By comparison, Bowen adds, “We’ve only had three years on record where U.S. mainland hurricane activity resulted in $50-plus billion in insured losses.”
What exactly constitutes a severe convective storm?
Severe convective storms include natural catastrophes such as thunderstorms with lightning, hail, tornadoes, and derechos, which are organized lines of thunderstorms with widespread damaging winds.
At the start of 2023, Gallagher Re says lingering La Nina conditions in the Pacific instigated “…an earlier start to severe connective storm activity” than normal. In addition, record water temperatures in the Gulf of Mexico only helped fuel the situation. Tornadoes in Arkansas, Illinois, and Mississippi caused a significant loss of life and property damage in 2023’s first-half. In fact, the Triple I says Illinois had the most recorded tornados of any state this year.
They were followed by this summer’s intense hailstorms in Colorado and Minnesota, among other states.
The higher dollar amount of the insured losses can be attributed in part to these events striking densely populated U.S. communities, the site of homes and commercial buildings which are costly to repair and replace, a Swiss Re study cited by Triple-I found. The 2023 weather and climate disasters causing at least $1 billion in damage, both insured and uninsured, are chronicled by the federal government and featured in a chart which is incorporated into Triple-I’s latest Issues Brief.
How are insurers responding?
According to the Issues Brief, insurers are responding to the increase in storm-related losses in two ways, through increased deductibles and parametric insurance. Some insurers are obligating their policyholders to bear part of the risk-sharing via increased deductibles, while other insurers are looking to parametric policies as a way to deal with the increased of these events citing speed of payment and reduced policy administrations costs.
Source: III
