Risk to U.S. property, and therefore through convective storm losses to insurance, reinsurance and also ILS markets, is as high from severe thunderstorms as it is from hurricanes, according to broker Willis Re.
A new study published by the reinsurance broker along with Columbia University, a Willis Research Network (WRN) partner, shows that average annual losses from severe convective storms (SCS) was $11.23 billion, compared with $11.28 billion from hurricanes between 2003 to 2015.
This means that for the past decade, thunderstorms was the largest annual aggregated risk peril to the U.S. insurance industry, causing significant losses to reinsurance and ILS or collateralized markets.
Prasad Gunturi, executive vice-president at Willis Re commented; “Regional variability in increased or reduced severe convective storm frequency due to the El Niño-Southern Oscillation (ENSO) phase can have a significant impact on regional and single state property insurance companies. In collaboration with Columbia University, we are working to develop a climate conditioned severe convective storm event set for portfolio probabilistic loss estimates. We hope the climate conditioned view of risk can help companies understand, manage and mitigate the regional and year over year variability in severe convective storm losses.”
The report also found that the frequency of severe convective storm events is higher following La Niña, and lower following El Niño.
Michael Tippett, associate professor in Columbia Engineering’s Department of Applied Physics and Applied Mathematics, added; “The latest research shows that ENSO and other climate signals modulate the frequency of tornado and hail activity in the U.S. We’re excited to be using that research as a scientific basis for making long-range (up to a month) forecasts of the meteorological factors that go along with severe convective storms.”
Willis Re now plans to produce monthly forecasts of tornado and hail activity for its clients, after the report found that ENSO conditions influence thunderstorm event frequency.
The report can be downloaded via the Willis Re website here.