Hail can drive as much as 70% of all U.S. severe convective weather and severe thunderstorm losses for the insurance and reinsurance industry, with another $10 billion plus year of hail related economic impacts expected for the country in 2018.
The severe convective and thunderstorm related weather peril has been driving increasing levels of loss for the insurance and reinsurance industry in recent years, with more than $10 billion of economic losses experienced each year for more than a decade now.
According to Aon Reinsurance Solutions catastrophe risk modelling team Impact Forecasting, severe weather insurance industry losses are already at $8.22 billion for the year 2018 so far, with a hail a significant contributor yet again.
It’s expected that this will pass $10 billion before too much longer, with some recent major storm and hail events still to be calculated and claims still being counted.
At a conference focused on convective weather and in particular hail at the National Center for Atmospheric Research in Boulder, Colorado this week, experts explained that the hail component is the major driver of loss.
It’s often assumed that tornadoes would be the main peril driving losses within the severe and convective weather space, but it is actually hail, which accounts for as much as 70% of the total according to Ian Giammanco, research meteorologist from the Insurance Institute for Business and Home Safety.
In fact, it looks like 2018 will be the 11th year in succession that hail economic losses could surpass $10 billion, according to another speaker at the event, Mark Bove, a meteorologist at Munich Re America.
Tornado and straight line winds are responsible for only 20% of the industry losses suffered by insurance and reinsurance firms due to severe convective weather, with the remaining 10% due to lightning strike damages, experts at the event highlighted.
Andreas Prein, a researcher at the National Center for Atmospheric Research, explained that climate change could have an effect on hail losses, as it could increase updrafts in storms, lifting water up higher into the atmosphere where it can form into ice crystals and the resulting hail stones form, Associated Press reported.
However, Prein also noted that while climate change might mean more impactful hail events in the future, it is certain that population growth, larger houses, more cars and other factors will increase the level of losses that insurance and reinsurance interests, as well as ILS funds, encounter.
Experts also highlighted that just because storms are severe it does not mean hail losses, are. Location is all important, Steve Bowen of Impact Forecasting highlighted, where a major hail storm strikes is critical to the eventual losses that re/insurers or ILS will suffer.