Convective storm losses run ahead of extratropical storms in Europe: Aon

Insurance and reinsurance market losses from the severe convective storm (SCS) peril in Europe are starting to run a little ahead of losses from the more widely accepted European peak peril of extratropical windstorms, according to data from Aon’s Impact Forecasting.

In announcing the expansion of two of its key European risk models, Impact Forecasting highlighted an interesting fact, that in Europe the severe convective storms (SCS) could perhaps be considered the insurance industry peak peril for the continent.

Impact Forecasting explained that, since 1980, European windstorms have driven $141 billion of insurance and reinsurance market losses, giving an average annual insured loss of $3.3 billion.

Meanwhile, severe convective storms in Europe have resulted in $89 billion in total insured loss, with an annual average of $2.1 billion.

But, fast-forward to more recent history, starting the same data from 2000 and the SCS peril overtakes, just.

Ssince 2000, SCS loss events have outpaced winter storms, Impact Forecasting said, highlighting that the severe convective storm peril in Europe has accumulated $78 billion in insurance and reinsurance market losses over that period, while European windstorms drove slightly less at $77 billion in cumulative losses.

Should SCS now be considered the peak peril for the European continent? It seems unwise to jump to such a conclusion, when extratropical European windstorms remain the largest property exposure and perhaps the industry has just been relatively lucky through the last two decades or so.

But, with convective storm losses also having risen sharply in the United States in recent years, with higher insured values and more exposure in their way nowadays, the same is perhaps now becoming true in Europe as well, as more insurable values are put in the way of these convective storm events.

Of course, there is also the climate to consider, and after recent years of severe convective storm losses in Europe many are pointing to climate change as an additional driver.

In a timely move, Aon has updated and expanded the reach and remit of its Impact Forecasting Europe Windstorm and Severe Convective Storm (SCS) catastrophe models.

The firm has now incorporated emissions scenarios within them, that inform current and future projections of climate and storm activity across the continent.

The European windstorm catastrophe model now covers 22 countries, expanded to include Iberia (Spain and Portugal), the Baltics (Estonia, Lithuania and Latvia), Hungary and Switzerland, recognising the importance of quantifying loss potential from windstorm events in these regions, which are less well-modelled, but have experienced major events such as Windstorm Klaus (2009) in Spain and Windstorm Alexandra (2014) across the Baltic region, Aon explained.

At the same time, the SCS model allows for flexible hours clause application to the results and has been expanded to cover 12 countries, with Slovakia, Hungary and Italy incorporate.

Italy has experienced major hail events as recently as 2022, which can now be modelled along with other historical and scenario events across the region.

Adam Podlaha, head of Impact Forecasting commented, “For more than 10 years, our European windstorm models have been helping re/insurers and corporations to quantify and assess their exposures, in order to make better business decisions as regards insurance premium calculation, reinsurance purchase, capital requirements, and claims handling. In this geographical expansion of the windstorm model, the vulnerability component is the main feature of the update.

“Based on five seasons of loss forecasting, the team has improved the damage functions to better reflect losses caused by smaller to medium storms. In addition, more residential classes have been added to better align to insurers’ data. Finally, introducing Open Exposure Data classes to the model in both ELEMENTS- and Oasis-based platforms, aligns it to client and market requirements.”

The newly expanded and updated catastrophe models are available through Oasis-based platforms, including Impact Forecasting’s ELEMENTS, the Oasis Loss Modelling Framework and Nasdaq Risk Modelling for Catastrophes

James Lay, Commercial Director, Nasdaq Risk Modelling for Catastrophes added, “Mounting losses caused by natural catastrophes, the impact of climate change and intense regulatory scrutiny means businesses are under pressure to better quantify their exposure and improve resilience to catastrophe risk.

“Despite more subdued activity in recent years, European windstorms remain a major peril and this represents a significant upgrade, adding to the depth and sophistication of models available on our platform.”