SCS continues to wreak havoc – how should insurers respond?
SCS continues to wreak havoc – how should insurers respond? | Insurance Business New Zealand
Reinsurance
SCS continues to wreak havoc – how should insurers respond?
Gen Re on how secondary peril events are becoming primary
Reinsurance
By
Kenneth Araullo
As 2024 progresses, secondary peril events, particularly severe convective storms (SCS), are causing significant damage to residential properties, commercial enterprises, and their insurers, as per the latest report from Gen Re.
Predictions at the start of the year suggested that a rapid transition from an El Niño to a La Niña climate cycle, combined with other factors like the sun entering its solar maximum, would lead to an exceptionally intense SCS season in 2024. These forecasts anticipated a higher-than-average number of tornadoes, marking the most significant activity since 2020 and 2021.
Additionally, warmer and wetter conditions were expected to result in more tornadoes than hail events, contrasting with the cooler, drier atmospheres that typically foster hail formation.
Gen Re’s analysis through the end of July appears to support these forecasts. Tornado occurrences are approaching historic highs, both in terms of numbers and annual trends.
Simultaneously, the frequency of wind events – encompassing windstorms, high winds, and damaging winds – is significantly above historical norms.
Conversely, the number of hail events involving stones of at least 1 inch in diameter is trailing behind historical expectations, aligning with the projected shift in weather patterns. Despite this, severe weather continues to drive an increase in both the frequency and severity of losses.
According to insights from Gen Re, whether these trends persist remains uncertain, but the impact on the insurance industry is clear. In this volatile environment, proactive risk management and careful accumulation control are essential.
Additionally, pricing strategies must adapt to the heightened uncertainty brought by these evolving weather patterns.
In a separate report, Demex noted that insured losses from severe convective storms (SCS) in the first half of 2024 have accounted for the majority of global catastrophe losses, with the United States experiencing a significant increase in insurance payouts.
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