General Insurance Article - Rise in convective storm losses due to exposure growth


Aon has revealed research on the drivers of severe convective storm (SCS) insured losses, which could influence the outcomes of the forthcoming Jan. 1, 2024 reinsurance renewals period by creating challenges for both insurers and reinsurers in terms of managing their exposures.

 Aon data show that to date in 2023, 70 percent of global insured losses were driven by SCS. In the U.S., SCS caused $35 billion of insured loss in the first half of 2023, following three consecutive years with at least $20 billion of insured loss in the first half.

 From 1990 to 2022, SCS exposures increased at a combined rate of 8.6 percent per year, while SCS insured losses increased at an annual rate of 8.9 percent. This variance highlights that more than 80 percent of SCS loss growth can be explained by exposure changes, an emerging form of volatility. Aon suggests that the remaining 20 percent could be due to small changes in climate that are not discernible in the weather ingredients that drive severe convective storms, other exposure factors or random chance. This dynamic should encourage re/insurers to place more emphasis on exposure management when mitigating the impact of SCS on their portfolios.

 John Jacobi, managing director within Aon’s Reinsurance Solutions’ U.S. actuarial team, said: “While climate is a driving force behind other perils, there is little evidence that the climatic factors that drive SCS are changing. Re/insurers instead must manage growing exposures in high hazard areas, which can be mitigated by traditional risk management techniques such as accumulation management, enhanced claims handling, and appropriate deductible, limit and premium levels. Going forward, the industry’s emphasis for the SCS peril should be less on climate factors, and more on traditional risk management to help shape better decisions.”

 According to Aon research, there are four main drivers of SCS exposure change:
 1. Real Gross Domestic Product, which accounts for assets in the economy, grew at an annual rate of 2.3 percent.
 2. Fixed reproducible tangible wealth, which accounts for how much the assets are worth, grew at an annual rate of 2.1 percent.
 3. Property cost inflation, measured by the producer price index for all construction and providing an estimate of how construction costs change over time, grew the fastest at a 2.8 percent rate.
 4. Population distribution, measured by a housing distribution index based on changes in housing units in high hazard states like Texas and other Sun Belt states in the U.S., had a 1.1 percent growth rate.

 Aon’s research about the drivers of severe convective storm (SCS) insured losses is available here. For further information on SCS and the Jan. 1 reinsurance renewals, please see Aon’s Ultimate Guide to the Reinsurance Renewal
  

Back to Index


Similar News to this Story

Sleighing the risks by giving Santa the insurance he needs
While you might be the most magical employer in the world, we know that even you aren’t immune to the risks of running a global delivery service! From
Diversity improving in insurance and long term savings
Key figures from the Association of British Insurers’ latest Diversity, Equity and Inclusion (DEI) data collection highlight the work of insurers and
Almost a third of homeowners have been victims of burglaries
Research commissioned by Co-op Insurance reveals that almost one in three (29%) homeowners have been the victims of theft from their home. The member-

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.