The drivers behind SCS losses are complex: Swiss Re

Easily sitting in the top three biggest discussion points at this year’s APCIA conference is the threat of severe convective storms (SCS), whether recent heavy losses should be considered a future norm and how the industry manages and prices this complex risk.

It is easy to see why. In 2023, global insured losses from SCS accumulated to $64 billion, comprising more than half the insured losses from all natural catastrophes last year. That continued a worrying trend of increasing losses over the past decades—and 2024 has been just as bad. 

In the first half of 2024, SCS led to insured losses of $42 billion globally. In the US, 12 storms each caused losses of $1 billion or more, demonstrating the loss potential of this peril. Insured losses from SCS in the US have increased by around 8 percent in nominal terms annually since 2008.

“Hail is by far the main loss-making culprit of SCS.”

Elisabeth Viktor, SCS lead at Swiss Re, spends a lot of time assessing the “why” behind these numbers. She suggests that a number of interlinked factors are making things worse.

“As with other perils, rising exposures due to economic and population growth, and urbanisation, are the main forces driving SCS losses higher,” she said. “We estimate they account for around a third of the annual growth in SCS-related insured losses seen in the US over the last 15 years. 

“Another driver of rising losses is changes in vulnerabilities. For example, hail is by far the main loss-making culprit of SCS. Ageing rooftops, which increasingly host glass solar power system installations, are a main victim. This confirms the importance of detailed exposure data to better track changing values and value concentrations,” she added.

In the US, she notes, all SCS-prone regions suffered similar insured losses last year: about 30 percent originated in the Midwest, 30 percent in the central US, and 20 percent in the southeast. “The geographic loss distribution in 2023 was similar to that of the preceding two decades,” she said.

As APCIA gets into full swing this week, this topic is being talked about more, as the industry seeks answers to the many questions the peril poses. 

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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