Insurance industry losses from severe thunderstorms, tornadoes and flooding in the U.S. during May is expected to surpass $1 billion, according to Aon Benfield’s catastrophe modelling unit, Impact Forecasting.
The reinsurance brokers cat modelling division’s latest Global Catastrophe Recap report from May highlights extensive damage from the wettest May on record in Texas and Oklahoma, two states which the report notes have relatively low flood insurance penetration levels.
“A meteorologically active month around the globe in May was highlighted by record rainfall from persistent thunderstorms across the U.S. states of Texas and Oklahoma.
“The rains, which were 500 per cent greater than normal values for the month of May in some locations, led to major riverine and flash flooding in areas that had long been mired in a multi-year drought,” confirmed Steve Bowen, Impact Forecasting’s associate director and meteorologist.
The study also reveals that the economic loss from the severe weather in May is predicted to exceed $3 billion.
The report signals the potential for a hit to reinsurers and even insurance-linked securities (ILS) market participants, as losses from previous months, including April’s estimated U.S. insured industry loss total of $4 billion, continue to be aggregated.
In Texas alone, over 5,000 homes endured flood inundation, including populous, metropolitan areas in Houston, Austin and Dallas, says the report.
Discussing the intense, devastating flooding experienced in parts of the U.S., Bowen said; “In the immediate aftermath of the event, Impact Forecasting was able to successfully implement flood extents and scenarios into our U.S. flood model for deployment to clients.”
Apart from the intense flooding experienced in the U.S., adverse weather also contributed to preliminary reports of 412 tornadoes during May by the Storm Prediction Centre, which the report notes would “be the highest number of U.S. tornadoes in a month since April 2011 (758).”
Adding; “Up to softball-sized hail and straight-line winds gusting beyond 80 mph (130 kph) also caused damage across the central and eastern U.S.”
After a very slow start to the U.S. tornado season, the tornado and severe storm report figures are now trending towards the average which would also suggest insured losses are approaching the same, for the time of year.
Elsewhere in the world significant flooding in China contributed to an above $3 billion economic loss total, and claimed the lives of 81 people.
Flooding also occurred in parts of Australia, negatively impacting agriculture operations and causing widespread damage to property. According to the report, the Insurance Council of Australia reported insurance payouts from the flooding reached $280 million.
In India, a severe, sustained heat wave took place during May, claiming the lives of at least 2,500 people, a tragic event that produced one of the highest death tolls from a heat wave on record, according to Impact Forecasting.
Following the earthquakes in Nepal during April, a 7.3 magnitude aftershock quake struck near Mount Everest in early May, which the report states has contributed to a staggering 9,00 deaths from earthquakes alone, from April 25th to may 12th.
$366,000 of insured industry losses also came from the Philippines, and $23.2 million of insured losses came from Okinawa, Japan, after intense rain and winds were brought to the areas from Super Typhoon Noul.
The study also mentions the first tropical storm to form in the 2015 Atlantic hurricane and tropical storm season, the unseasonably early tropical storm Ana that made landfall in South Carolina, although the reports notes that damages were minimal.
Time will tell whether reinsurance programmes, or indeed any insurance-linked securities (ILS) funds, will be impacted by recent U.S. severe weather events. The aggregation of losses across the U.S. in recent months and the possibility that severe weather conditions continue could see the totals hike.
Over the course of the severe thunderstorm season in particular, that signals a very real possibility for exposure if aggregated losses keep rising, meaning that managers and investors in the space should keep an eye on the rising totals.
To date, Impact Forecasting estimates that severe weather in the United States has caused around $4.33 billion of insurance industry losses. This is still well below the $11.9 billion ten-year average, but will be expected to rise further as losses from May continue to be counted and losses from June are added.