U.S. severe weather & hail drove billlion plus insured losses in April: Aon

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Outbreaks or severe and convective weather in the United States, including large hail, tornadoes and thunderstorms, are set to drive well over a billion dollars of losses to the insurance and reinsurance sector, according to Aon.

Weather image from DreamaticoMore than 250 tornadoes touched down in the U.S. in April 2019, the most for that month since 2011, Aon explains in its latest catastrophe update report.

This tornadic and associated convective weather activity drove multi-billion-dollar thunderstorm economic losses during the month, the broker said, with the insurance and reinsurance industry set to take a significant proportion of them.

The most impactful tornado outbreak was struck southern and eastern sections of the U.S. between April 13th to 15th, resulting in the deaths of at least nine people and causing widespread property damage.

With 70 tornado touchdowns, baseball-sized hail, and damaging straight line winds gusting to 100 mph across parts of Texas, Louisiana, Arkansas, Mississippi, and further eastward into the Midwest, Southeast, and Mid-Atlantic, this spell of convective weather has driven estimated economic losses of up to $925 million, with insurers set to pay for around $700 million of the damage.

That’s a relatively high percentage of the economic loss set to fall to insurance and reinsurance interests, as is typical of major severe thunderstorm and convective weather outbreaks that strike more urbanised areas.

A second major tornado outbreak struck central and eastern areas of the U.S. between April 17th and 19th, killing at least four people.

This outbreak saw at least 96 tornadoes reported across a dozen states, almost half of which were recorded in Mississippi. There were also widespread reports of damaging straight-line winds and large hail.

This event has resulted in total economic losses in the hundreds of millions (USD), Aon said, with the majority of the costs falling to insurance capital.

Steve Bowen, Director and Meteorologist within Aon’s Impact Forecasting team, commented, “April is often defined by severe convective storms across North America. While thunderstorms produced notable tornado, hail, and non-tornadic wind damage in the United States, there was particular focus on widespread flooding in the U.S. and Canada. The multi-billion-dollar uninsured cost of the flood events – including those in the Missouri, Mississippi, St. Lawrence, Ottawa, and Saint John River Basins – has once again exposed the existing protection gap within mature insurance markets for a specific peril. Determining best practice approaches to understand flood risk and further encourage insurance take-up should help lower this gap and minimize the financial burden on affected residents.”

Another severe thunderstorm outbreak resulted in softball-sized hail and damaging straight-line winds across the Southeast U.S. from April 5th to 8th, with the most significant hail damage occurring in Texas, while damage was also seen in Louisiana, Mississippi, and Alabama.

This severe thunderstorm related outbreak of large hail has driven total economic costs of more than $250 million, Aon said, while insurance and reinsurance interests would likely pay around $190 million of this.

Additional severe and convective weather outbreaks from April 23rd to 25th and April 30th to May 2nd, affected the Plains, Southeast and Midwest regions, with both outbreaks set to drive hundreds of million so economic losses as well.

So given the relatively high percentage of these outbreaks that are set to be paid for with insurance and reinsurance capital, it’s safe to assume that April 2019’s severe and convective thunderstorm type weather has driven minimally a billion dollars of industry losses.

That could be enough to affect some collateralized reinsurance arrangements and may drive a few losses to quota share reinsurance partners, from the affected primary insurers that bear the losses.

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