While severe convective storms (SCSs) such as strong winds, hailstorms and tornados are historically categorized as secondary perils, new data from Cotality's
According to the report, SCSs have typically been high in frequency, but low in damage severity. Recent data shows, however, that such events are now primary drivers of annual insured losses.
With the transition of SCSs from secondary to primary threats, underwriters can no longer rely on historical weather patterns to predict future losses. According to Cotality, underwriting will need structure-level property data for effective risk prediction and pricing for adequate recovery options and loss payouts. The report also suggests that catastrophe risk modelers should prioritize identifying higher-risk event concentrations for improved resource allocation and portfolio balancing.
Cotality notes that hail is one of the most damaging in property insurance claims; about 42% of properties, or 43.5 million homes, analyzed in the report are at moderate or great risk of hail damage. If each of these properties were declared a total loss, this would total to $17.8 trillion in reconstruction cost value.
The above figure from Cotality's report illustrates that a single hailstorm can now generate catastrophic financial losses similar to a major hurricane. At the 500-year return period that represents the rarest, most extreme events, the modeled "all perils" loss reaches $71 billion – of which a single extreme hailstorm accounts for $58 billion.
