The data from Aon reveals that as of 2023, a significant 70% of global insured losses can be attributed to these weather events, also called severe convective storms (SCS).
In the United States, the first half of 2023 alone resulted in $35 billion in insured losses due to SCS, marking three consecutive years with at least $20 billion in losses during this period.
Aon’s research shows a consistent trend from 1990 to 2022, with SCS exposures growing at an annual rate of 8.6%, while insured losses related to SCS increased by an annual rate of 8.9%.
The majority of this increase in SCS losses, over 80%, can be directly linked to changes in exposure, presenting a new form of volatility in the industry. Aon’s analysis suggests that the remaining 20% of SCS loss growth could be attributed to subtle climate shifts, factors related to exposure changes, or random chance.
This underscores the importance for insurers and reinsurers to focus on robust exposure management strategies to mitigate the impact of SCS on their portfolios.
John Jacobi, Managing Director within Aon’s Reinsurance Solutions’ US actuarial team, emphasized that while climate factors play a role in many perils, there is little evidence indicating significant climatic shifts driving SCS events. Therefore, he recommended prioritising the management of growing exposures in high-risk areas through traditional risk management techniques.
Aon’s research highlights four key drivers of SCS exposure change: Real Gross Domestic Product (GDP) growth, Fixed Reproducible Tangible Wealth growth, Property Cost Inflation, and Population Distribution. These factors collectively contribute to the dynamic changes in SCS exposure and associated risks.
