According to BMS Re, a specialised reinsurance broker, in the first half of 2023, severe weather events wreaked havoc across multiple states in the US, leading to historic losses for the insurance industry.
Texas, in particular, has suffered the most, with insurance losses exceeding $7.2 billion. Other states, including Illinois, Kentucky, Colorado, Tennessee, Arkansas, and Missouri, have also experienced insured severe weather losses surpassing $1 billion. Contributing to the higher losses are severe weather events in California at the beginning of the year, driven by numerous atmospheric river occurrences.
The severity and frequency of these weather events have surpassed historical records, raising concerns about the impact on insurance companies. While factors like socioeconomic elements and inflationary pressures contribute to higher losses, it is crucial to analyse the weather patterns and understand the uniqueness of this season.
Data from the NOAA National Weather Service (NWS) reveals a significant increase in tornado, hail, and wind events across the US.
Tornado counts reached near-record levels by the end of March, accompanied by one of the most active tornado outbreaks in history. However, wind damage reports have since leveled off, while hail reports have remained average, despite typically being a major driver of insured losses.
Visual analysis of NWS office zones highlights elevated severe weather reports in regions such as the Boulder/Denver area in Colorado and the Interstate 20 corridor spanning Georgia to central Texas.
Elevated reports have also been observed in Illinois, western Kentucky, Tennessee, and Mount Holly in New Jersey, primarily due to the severe weather outbreak on March 31. Conversely, the East Coast, mid-Atlantic, and parts of the upper Midwest have experienced below-normal severe weather occurrences.
To gain a deeper understanding of severe weather patterns, BMS Re has partnered with Verisk and utilises high-resolution models and radar data. Their analysis shows occurrences of strong wind gusts exceeding 60 mph and radar-derived hail swaths of 1 inch or greater hail during the first half of 2023.
The unprecedented severity and widespread impact of severe weather events have affected not only the traditional “bread basket” states but also regions like California and Florida. The insurance industry faces significant challenges in dealing with the surge in losses, which may have implications for policy renewals in the coming months.
As the year progresses, it becomes evident that no area is immune to severe weather, highlighting the need for comprehensive risk assessment and mitigation strategies.
The insurance industry must adapt and prepare for the potential ramifications of these extraordinary weather patterns to ensure the long-term sustainability of their operations, the broker noted.
