Tag Archives: hailstorm

What Should We Make of the U.S. Severe Convective Storm (SCS) Season So Far?

After a blistering start to the 2017 U.S. severe weather season in which tornado, hail, and wind reports were at near or record levels of activity through to March, recent months have been closer to normal. As of early July, overall observations are still above the 10-year running average (2005-2015), but they’re slowly falling back into the expected bounds.

Nevertheless, the events that have occurred have certainly left their mark on the (re)insurance industry. Total U.S. insured losses from SCS events during the first quarter of 2017 (January-March) were $5.7 billion, the highest in the last 18 years. As of early July, losses were estimated to be greater than $14 billion, marking the tenth consecutive year that SCS insured losses have exceeded $10 billion.

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Is Europe Due for Severe Hailstorms this Summer?

Summer has just started, but weather has already been warm over Europe. Many countries have experienced very high temperatures over the first weeks of June, and there is a chance the 2014 summer will be warmer than normal. A warm atmosphere can bring very high convection potential and potentially lead to a busy severe convective storm season. While seasonal forecasts are uncertain, severe hail events already experienced in June already point to a potential increase in hail risk this year.

The first noticeable hailstorm of the season hit Germany, France, and Belgium between June 7 and 9. Over that period, southern air masses were very warm and clashed with much cooler air from the north. This frontal system brought heavy local wind, rain, and hail, especially over the north of France, Belgium, and northwest region Germany, where large cities like Essen, Düsseldorf, or Köln experienced property damages and six casualties.

RMS scientists Dr. Navin Peiris and Panagiotis Rentzos led a reconnaissance survey in the region a few days after the event and noted that even if there was some evidence of direct hail damage to roofing, most of the substantial damages and transport disruption around Düsseldorf came from tree falls due to very strong wind gusts.

Tree Fallen in Hailstorm

July 12, 2014 will be the 30th anniversary of the most expensive hailstorm in the history of Germany, which generated losses around US$2 billion 1984—half of which was insured. The hailstorm developed amid a streak of late afternoon thunderstorms after a day of intense solar heating. A mass of moist sea air flowed into southern Germany overnight and the combination of moisture and rising air triggered a rapidly intensifying thunderstorm system over the Swiss Mittelland that propagated eastward. Hail fell within a 250-kilometer (150-mile) long and 5–15 kilometer (3–9 mile) wide swath from Lake Constance to eastern Bavaria near the Austrian border. At around 8 p.m. local time, the hailstorm passed over Munich, damaging approximately 70,000 houses, 200,000 cars, 150 aircraft, and most agricultural crops within the storm’s path. More than 400 people were injured. Over half of the insured losses were attributed to damaged cars.

July also marks the first anniversary of the 2013 German hailstorm, which caused insured losses of US$3.4 billion, the second highest from a single natural catastrophe in 2013. Like the June 2014 events, the storm hit after a prolonged period of above-average temperatures in central Europe. The first hail event hit northern Germany on July 27, and the second dropped hailstones with a diameter of up to 8 cm (3.1 in) over south Germany the next day.

Interestingly, all these major events occurred in regions with very high potential of hail damage, which can be described in catastrophe models such as the RMS HailCalc model in terms of kinetic energy to help better manage hail risk. In June, RMS presented the first results of a reconstruction of this hailstorm on at the 1st European Hail Workshop. The paper illustrates how a fast estimation of insured hail losses could be obtained following an event in the future. Developing methods of estimating insured loss totals and return periods immediately after an event are an ongoing area of research in the insurance industry, as illustrated in the RMS paper and others at the workshop.

Hailstorm Image Map

 

Severe Thunderstorm Risk: What You Don’t Know Can Hurt You

Are you using experience based rating to underwrite severe thunderstorm risk?

Many use this approach in North America, but if you do, you could be missing out on the full loss picture for this complex peril. Though tornado and hail are responsible for a major part of the annual insured loss, straight-line winds and lightning can also contribute to a material portion.Annual Insured U.S. Thunderstorm Losses by Sub-Peril

More importantly, recent trends in industry claims practices, event severity, and exposure concentration have indicated that the risk landscape is changing, suggesting that past hazard and loss patterns may not be reflective of those in the future.

Let’s take a close look at these trends.

From a Claims Perspective

Claims have been increasingly inflated and more severe in recent years, particularly in high-risk areas. RMS analysis of over $5 billion in new claims data has shown that the average size of a residential claim has increased over 9% per year from 1998 to 2012. Commercial claims have also increased around 9% per annum, while automobile claims have increased by 2%. These increases may not be captured solely by analyzing past hazard and loss patterns, hindering underwriters’ efforts to develop effective pricing practices.

From a Hazard Perspective

Major severe thunderstorm events have recently caused untold damage and loss, well beyond what was estimated using historical records. Between 2008 and 2013, the U.S. experienced over $80 billion in insured losses from thunderstorm related hazards, and two of these events each generated more than $7 billion in insured losses.

Similarly, events such as the 2010 Phoenix, AZ hailstorm, the 2011 Tuscaloosa, AL outbreak, and the 2013 Moore, OK tornado are redefining the way the industry sees tail risk. Such extreme events and their corresponding losses demonstrate the shortcomings inherent to using historical experience as the sole foundation for a view of thunderstorm risk.

From an Exposure Perspective

More people are living in high-risk regions like the Great Plains, the Midwest, and the Southeast, increasing the amount of insured exposure at risk. From 2007 to 2012, high-risk states like Oklahoma, Nebraska, and Kansas exhibited some of the largest increases in direct premiums written. With increasing exposure comes an increased likelihood of impact from severe weather, especially in high risk areas, making it imperative to understand the risk holistically, not just in large population centers. Relying on experience based rating alone will make it difficult to estimate losses in rural or newly developed areas, as such areas generate limited historical records.

Do these trends have a material impact on the North American catastrophe risk landscape? Absolutely; the impact is clear if we look at the annual loss numbers.

Annual Losses

In the U.S., average annual losses from severe thunderstorms are second only to hurricanes, causing over $10 billion in insured losses each year since 2003. In fact, losses driven by tornado, hail, and straight-line wind collectively contributed to more than one-third of U.S. annual insured losses between 1993 and 2012.

Where Can We Go from Here?

Historical experience, while important, may not be sufficient for fully understanding severe thunderstorm risk. Relying solely on this data could lead to poor underwriting practices, misinformed pricing decisions, and ineffective portfolio management. For a more complete picture, it is necessary to add a probabilistic element to the historical analysis, so you can estimate thunderstorm risk anywhere in the country (not just population centers), and differentiate the risk accurately across regions, lines of business, and risk characteristics.

What has been your experience with estimating severe thunderstorm risk?