Insured losses from hail are at record highs as severe convective storms become more common and destructive, appearing in new places, and even storms that produce small hail pose unforeseen threats, a new report shows.
A report released this week by Allianz Business shows that SCS events continue to increase in frequency and intensity, resulting in billions of dollars in insured losses globally.
this Risk report examines growing South China Sea threatsit can appear with little warning and cause “chain reactions” like flash floods. According to Allianz, losses from SCS events last year amounted to $60 billion, accounting for almost half of all natural disaster losses.
In today’s dollars, SCS’s losses over the past three years totaled $208 billion, exceeding the long-term average. The report shows that by 2025, these storms will be 1.3 times the 10-year average, and U.S. insured losses from South China Sea events will be 1.4 times the 10-year average from 2015 to 2024.
Recently, an increasing number of insurance companies have begun issuing reports looking at the increasing losses from SCS events and secondary disasters. A report released by the Swiss Re Institute last week showed that incidents in the South China Sea, as well as floods and wildfires, will cause total insured losses from global natural catastrophes to reach $107 billion in 2025, accounting for 92% of the record.
According to a report released by Gallagher Re in January, SCS events cause at least 47% of insured losses. The report states that SCS events will cost global insurers $208 billion in 2023, 2024 and 2025, making this risk “the leading driver of annual losses in the industry.”
According to Allianz, the most severe SCS losses come from hail, accounting for 50% to 80% of all losses. The second largest loss driver is damaging winds, such as tornadoes and derechos.
“I would say it’s surprising to a lot of people how much losses from severe convective storms have increased over the last five to 10 years,” said Andrew Higgins, Americas technical manager at Allianz Risk Consulting. “In the past, those losses were manageable and certainly lower than losses from hurricanes, typhoons, etc. But now they’re getting to the point where they’re on par with some of the other hazards.”
Equally surprising was the rapid expansion of hail damage, with hail causing severe damage in more areas.
“What we’re seeing now is that hail damage is the largest component of damage from severe convective storms, and what’s interesting is we’re seeing how damage is occurring in areas we haven’t seen in the past,” he said.
In the United States, dry weather in the Great Plains has shifted tornado lanes eastward into southeastern states, which have seen an increase in the number of tornado-friendly days. In addition, warming and stronger updrafts are expected to produce more of the largest hailstones, with the frequency of the most damaging hailstones expected to increase by 15% to 75%, depending on climate conditions, the report said. Munich Re also noted that the frequency of hail-related SCE events appears to be increasing in Europe.
The report states that the most expensive causes of hail claims are damage to aircraft, buildings, manufacturing plants and renewable energy.
For Don Giuliano of Canopy Weather, a weather technology company that serves the insurance and recovery industries, the report confirms a trend he’s been watching for some time.
“Allianz’s report highlights that severe convective storms are no longer a secondary risk and their losses are now comparable to major hazards such as named storms,” Giuliano said. “Hail is the main driver of this shift, with the risk of hail increasing in developed regions, which often causes the majority of losses. It is also consistent with the rise of so-called ‘kittens’, where frequent, less severe events cluster together to cause large material losses to the industry.”
Hailstones vary in size from small pellets to the size of grapefruits. The report breaks down the size of hailstones and the dangers they pose: Accumulation of smaller hailstones could cause roofs or buildings to collapse if buildings are not designed to withstand the additional load. Medium-sized hail (0.2-1 inch) can damage crops, fruit and glass. Larger hail (1.2-2 inches) can damage roofing materials and damage vehicles, while extremely large hail (3-4 inches) can cause severe structural damage.
Higgins said that while larger hail has higher speeds and more kinetic energy and often causes severe damage, he often sees severe damage where smaller hail poses potential secondary hazards, such as clogging roof gutters, causing water to accumulate and roof collapse.
“I think most building codes around the world generally don’t take into account that hail clogs gutters, causes water to pool, and causes roof structures to collapse, so we’re seeing some unusual damage from hail,” he added.
Geoffrey Conrad, a claims professional with more than 20 years of experience who spends a lot of time training adjusters, believes the increase in secondary hazards and potential damage from small hail is particularly concerning due to changes in the claims adjuster profession.
“The industry is moving from field regulator models to tabletop regulator models, and that’s going to create a whole problem where as hail gets smaller in size, untrained professionals won’t necessarily be able to see a lot of the damage and miss a lot of it,” Conrad said. “Additionally, as many of the veteran adjusters who have been trained to identify hail damage age, I think we’ll see a lot of underreported damage estimates. Because new adjusters tend to miss a lot of collateral damage, even with sizable hail — hail is not selective and can damage roofs, siding, fences and even mailboxes.”
According to the Allianz report, roofs and roof-mounted equipment (heating units, air conditioning units, solar panels) are the most commonly damaged parts of buildings when hail or high winds strike. The greatest damage often comes from a leaky roof that causes water damage to the home below, or a power outage that interrupts your business.
The report predicts a greater risk of hail in the future, based on projections of climate change.
“As climate change affects weather patterns, the frequency and intensity of hail are likely to increase, leading to more frequent claims and increased risk exposure for insurers,” Allianz said.
photo: Carl-Joseph Hildenbrand/dpa photo credit: AP
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