Last weekend (April 13-14) marked the first major U.S. severe convective storm (SCS) outbreak of 2019. Drawing energy from warm, humid air brought over land from the Gulf of Mexico by a dip in the jet stream, hail, strong winds and/or tornadoes were reported in 19 states stretching from Texas to New York. There have been at least nine fatalities reported. The worst damage occurred in Texas, Louisiana, Mississippi, and Alabama, where over 150,000 homes and business lost power.
Damage surveys are ongoing, but as of April 16, there had been 22 tornadoes confirmed by the National Weather Service, including two EF-3 rated tornadoes in Texas, with estimated wind speeds of 140 miles per hour (225 kilometers per hour). Early assessments indicate that several hundred buildings have been damaged or destroyed, but the total number will unlikely be known for a few more days at least – and could be significantly higher. In the meantime, insurers will be sending out loss adjusters to try to establish the scale of the claims they are likely to incur. The final cost may not be known for several months.
But why is spring and not summer the peak season for SCS, what is the current state of SCS risk – and what has its impact been on the insurance industry over the past few years?
Favorable Conditions for SCS
The most favorable atmospheric conditions conducive for severe convective storms occur when a layer of warm, moist air lies beneath a layer of cool air. This situation is most common in the spring when the ground temperatures are beginning to increase, but in the upper atmosphere the air temperatures are still cold. This vertical temperature contrast means that if air rises or is lifted from the surface, it remains buoyant and continues to rapidly rise and condense – forming thunderstorms.
For tornado formation, wind shear (a change in wind direction or speed with height) is an additional prerequisite. Springtime is also when the jet stream – a ribbon of fast-moving air about ten kilometers (6.2 miles) above the surface – meanders south over the southern United States. This is conducive for severe convection in three ways:
- It brings cold, northern air southward at high altitudes, reinforcing the vertical temperature contrast
- On the eastern edge of this “meander loop”, it brings in moist air from the Gulf of Mexico over land, providing fuel for condensation
- The fast-moving jet also allows air to diverge at upper levels, promoting ascent from below to replace it.
In summer, although the surface is warmer, the upper atmosphere has also heated up, reducing the vertical temperature contrast that promotes deep convection. The jet stream also retreats north over Canada.
SCS Frequency Accumulates Losses
Although individual tornadoes typically cover relatively small areas, and damage caused by hailstones would rarely render a home completely uninhabitable, it is the frequency of severe weather events that makes them such an expensive peril for the U.S. insurance industry.
For example, there are around 1,300 tornadoes in the U.S. in an average year – more than in any other country. Using RMS modeling, the average annual insured loss from SCS in the U.S. is now the same as from hurricane, at around US$17 billion, and SCS losses are escalating, at 11 percent per annum between 2001-2017. And unlike flood damage, tornado, hail and straight-line wind damage is typically covered by private insurance in the United States. The ratio of insured to economic losses has wavered between 0.6 and 0.7 over the last 15 years.
Severe convective storm hazard varies from year-to-year as well. 2018 was unusually quiet for tornadoes, with 991 recorded and ten fatalities – the lowest number since records began in 1875. There were no tornadoes of EF-4 or EF-5 strength (the two most powerful ratings) during 2018. By contrast, 2011 had six EF-5 tornadoes, including the devastating Joplin, Missouri tornado which killed over 150 people.
In addition to interannual variability, individual severe convective storm events themselves vary greatly in the losses they cause. Many would fall beneath an industry-standard definition of a catastrophic event (US$25 million insured loss at the national level) while others are multi-billion dollar events. The Moore, Oklahoma tornado of 2013 caused around US$2 billion in insured losses; while in 2017, three hailstorms in Colorado and Texas caused over US$1 billion in losses each. Hail is the main loss driver with around two-thirds of annual SCS insured losses caused by hail, around 20 percent caused by tornadoes and around 10 percent caused by straight-line winds.
After the storms from last weekend, and another six or so weeks of the spring season set to run, this period is crucial in establishing the level of insured losses that the industry will have to bear, whether it is from a collection of minor events or a repeat of the multiple billion dollar events witnessed in 2017.