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Re/insurance sector faces $1.5bn+ April severe thunderstorm bill: Aon


The insurance and reinsurance industry is facing a total industry loss of more than US $1.5 billion following the impact of a number of outbreaks of severe convective weather, including thunderstorms, tornadoes and large hail, as the lions share of a $2.3 billion economic loss should be covered by insurance.

Supercell and tornado severe convective weatherIn its latest monthly catastrophe recap report, Impact Forecasting, the catastrophe risk modelling and analytics arm of reinsurance broker Aon Benfield, said that April’s severe thunderstorms have caused an economic loss of $2.3 billion, of which 65% is expected to be paid by the insurance and reinsurance market.

The brokers cat modelling unit explained that during the month of April at least five separate convective storm systems resulted in severe thunderstorm and tornadic weather across the United States during the month.

As a result, extensive damage was experienced across central and eastern sections of the country, with the most significant severe convective weather outbreak striking the Plains, Midwest, Southeast, Mid-Atlantic, and the Northeast during the second week of the month.

In this particular outbreak, almost 70 tornado touch-downs were reported and large hail of up to baseball size also impacted the region, resulting in major impacts to residential and commercial property and vehicles.

This same severe storm system also caused major snowfall accumulations in the Upper Midwest and New England, while drier weather behind the storm ended up fueling major wildfires across the Plains, most notably in Oklahoma.

The total combined economic loss due to convective storm-related damage in the U.S. in April has been estimated at approximately $2.3 billion, while the insurance and reinsurance sector is expected to pay at least $1.5 billion of the resulting claims.

Michal Lorinc, an analyst at Impact Forecasting’s Catastrophe Insight team, explained that these types of loss event can be seen further afield as well, “As the peak of the severe weather season approaches in the United States, it is worth highlighting the impact of the thunderstorm peril in Europe.

“As in the U.S., hail has been particularly damaging to European residential and commercial property, as well as vehicles, with several historical events prompting insurance payouts in excess of a billion euros. Given this risk, Impact Forecasting will soon release a hail model that includes coverage for several European countries, to help our clients better prepare for the potential events.”

Other natural catastrophe and severe weather events from April included:

  • Persistent flooding in Kenya killed at least 78 people, and caused extensive water damage to homes, cropland, and infrastructure. Regional governments indicated that total economic damage would near KES35 billion (USD350 million), including KES20 billion (USD200 million) alone to infrastructure.
  • Further flooding and casualties were noted in the African nations of Somalia, Tanzania, Ethiopia, and Rwanda, damaging more than 10,000 homes.
  • Extended cold and snow in China affected nearly 623,900 hectares (1.54 million acres) of cropland. Total economic losses were estimated at CNY9.38 billion (USD1.5 billion), primarily to the agricultural sector.
  • Winter weather in the Canadian provinces of Ontario and Quebec resulted in total combined economic losses in excess of USD360 million, with insurance losses expect to exceed USD180 million.
  • Torrential rainfall over the Hawaiian Islands led to widespread flooding, with at least 532 homes damaged or destroyed. The state government allocated at least USD125 million to flood repairs.
  • Tropical Cyclones Josie and Keni impacted the Fijian islands. Combined damage to physical property, agriculture and infrastructure was estimated at more than USD10 million.

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