Hail drives 2023 US SCS loss trends. Insured total nears $40bn: Bowen, Gallagher Re
Hail damage is once again driving the loss trend for severe convective storms (SCS) in the United States, with the insurance industry loss tally nearing $40 billion already this year and a record number of multi-billion dollar events seen, Gallagher Re’s Steve Bowen has said.
Bowen, the Chief Science Officer of reinsurance broker Gallagher Re, explained in a Linkedin post that 2023 has seen “relentless” severe convective storm (SCS) activity, with insured losses rising commensurately with this activity.
Already, Bowen’s data shows that 2023 is on-track to be the third most costly year for the insurance and reinsurance industry from the US SCS peril.
“We are reaching the point of inevitability that insured US SCS losses will top $40B for the year, and become just the third year on record to reach that threshold — joining 2011 ($40B) and 2020 ($44B). Let’s not forget that we’re already nearing $40B for events prior to August 1,” he explained.
Through the middle of July, the per-outbreak average cost for insurers is already above $1 billion, with only 2011 having seen a higher per-outbreak cost at $1.3 billion.
Bowen highlighted that, “There have already been a record 8 multi-billion-dollar US SCS insured events. Since 2000, the SCS peril has accounted for 135 billion-dollar-plus insured losses in the US. All other perils combined only tally to 102.”
The data Bowen shared shows some stark trends in the size of SCS insured loss events in the United States.
The graphic in question, seen below,shows 2023 already with 8 individual $2 billion plus insured SCS loss events, the highest number on record, while there have been 12 individual $1 billion plus events, the second-highest seen.
He went on to write that “The bucketing of perils into “primary” vs “secondary” silos feels more obsolete by the day,” saying that there are already plenty of examples where a so-called secondary peril has driven primary level losses.”
While hail damage continues to be a significant contributor to the annual SCS losses experienced in the US.
“The other plain truth? Hail is predominantly driving the loss trend. Not tornadoes. Hail may not be as photogenic as tornadoes and not get the prime media coverage, but it absolutely should be getting properly described as the major risk it continues to pose. In any given year, hail drives 50 to 80% of SCS loss claims,” Bowen wrote.
He further explained that, “There is no question that growing exposure footprints has raised the loss potential regardless of whatever enhancements climate change will bring.”
Concluding that, “SCS still does not get the respect that it deserves. It’s bringing very real challenges to large US national carriers and smaller regional carriers. The prospect of a $10B SCS year was a big deal in 2008. We annually average nearly $30B today.
“The definition of “normal” continues to evolve, and we must not get comfortable in these skyrocketing costs. There are construction practices and products available to better protect against these risks.
“We’ll never bring risk to zero, but any meaningful mitigation efforts must be considered and incentivized.”
