Figure 1. Miles driven across the country have increased 3.2 percent nationally. (Source: CCC Information Services Inc.)

Severe weather caused first quarter catastrophe losses of $4.8 billion. (Photo: Shutterstock)

Weather raises risks

A recent report issued by PCI/ISO on Q1 2016 financial results of U.S. property/casualty insurers reports severe weather and the resulting insured losses helped produce a 26.6 percent drop in U.S. property/casualty insurers' net income. Significant hail in Montana, Texas, and other states added to the highest first-quarter catastrophe losses in the U.S. since the 1994 Northridge earthquake. According to the PCI/ISO report, Q2 2016 direct insured property losses from U.S. catastrophes were $4.8 billion, versus the Q1 2015 losses of $3.6 billion, and $3.1 billion higher than the first quarter direct catastrophe loss average for the previous 10 years.

Analysis of customer claim count data from CCC Information Services Inc. reveals significant weather events in many parts of the U.S. led to large increases in losses from either hail or water (see Figure 2). In Q2 2016, 5 percent of the 6.9 million losses reported by CCC nationally resulted from water or hail, up significantly from only 1.2 percent in Q2 2015.

Figure 2. Significant weather in March and April increased claims by 16.5 percent. (Source: CCC Information Services Inc.)

Many states saw the largest losses in March and April, with states like Montana swinging from 1 percent of all losses from hail/water losses in Q1 2016, to 35 percent for Q2. Detailed data on individual weather events recorded by Aon Benfield include the following examples.

Figure 3. From the Pacific Northwest to the Southeast, hardly any portion of the country was spared from the severe weather. (Source: CCC Information Services Inc.)

Week ending Mar 18:  On March 13-17, the Southern Plains and Southeast experienced severe thunderstorms that brought flooding, hail, damaging winds, tornados and convective storm damage — especially in parts of Louisiana, Arkansas, Mississippi and east Texas. 

The Pacific Northwest also sustained damage from flooding and storms. On March 15, Illinois, Iowa, and Missouri, saw significant thunderstorms and hail reported as large as baseballs. Thunderstorms on March 16-17 across Texas and Oklahoma brought tennis-ball size hail in the greater Dallas-Fort Worth, Texas, metro area during morning rush hour.

Week ending March 25:  On March 23, thunderstorms hit from Iowa to Southern Texas, with at least 6 states reporting significant hail damage. The Dallas-Fort Worth, Texas, area saw golf ball-sized hail, damaging about 50,000 vehicles. There was similar damage in Oklahoma, Arkansas and Missouri. A March 24th storm moved east from the Ohio Valley to the Gulf Coast with Mississippi, Alabama, Tennessee, Kentucky and Indiana being the hardest hit. The two storm events in Texas on Mar 17-18 and Mar 23 are each individually expected to enter the Top 20 costliest insured loss event for the state of Texas since 1950 according to Aon.

Week ending April 1:  March 30-31 there were severe convective storm across the eastern U.S. that included thunderstorms, hail, damaging straight-line winds; the Plains, Midwest and Southeast were all affected. More thunderstorms were reported on Mar 30-31 from the Central Plains to the Midwest as tornadoes and hail hit Oklahoma and Kansas, and more hail pummeled Dallas. The storm then moved across the country, creating flooding and thunderstorms in Tennessee, Kentucky, Mississippi, Alabama, and Louisiana.

A La Niña event could have a major impact on weather across the country this fall. (Photo: iStock)

Loss volume grows

Subsequently, when comparing increases in claim count with and without comprehensive losses included, the swings in volume growth by state vary significantly (see Figure 4). Nationally, CCC reports repairable vehicle appraisal counts up 6.5 percent year-to-date through June 2016 compared to the same period in 2015; when comprehensive losses are excluded; however, that same count was up only 2.3 percent. 

There was a much larger increase in vehicles flagged a total loss, as weather events and an older vehicle fleet still on the road led to more vehicles being non-repairable. 

Related: XL says catastrophes cost $240 million, led by Canada fires 

Nationally, the percent of vehicles flagged total loss or non-repairable was nearly 17 percent by mid-year across all losses. For comprehensive losses, only 13 percent were flagged a total loss, while collision and liability losses saw nearly 18 percent flagged as a total loss. Each loss category group has seen about a one percentage point increase in total loss frequency so far this year versus mid-year 2015. 

Significant swings

Total loss volume in certain states also saw significant swings. For example, devastating storms in late June led to flash-flooding in West Virginia, causing damage to up to 5,500 homes, 125 businesses and swaths of the infrastructure said Aon. Total loss valuation counts were up 62 percent for the first six months of 2016 from the same period in 2015. When comprehensive losses are excluded, however, those same counts were up only 7.8 percent.

Mother Nature has played a major role driving up claim counts so far this year, as a very strong El Niño event has had significant impact on weather patterns across the country. As we head into the late summer and early fall, the developing La Niña will strengthen and become the dominant driver of North American weather.

The Weather Network predicts the warm weather pattern for the summer will persist into fall, driving up tropical storm activity in the Atlantic Basin. Seven hurricanes or tropical storms over the last 10 years have caused at least one billion dollars of damage in the U.S. Five of the seven came during the La Nina years of 2008 and 2011 according to CNN. And, unfortunately, the risk for a strong La Niña is enhanced following a strong El Niño, which we had last year — so not much relief may be in sight anytime soon.

Susanna Gotsch is the lead analyst for CCC Information Services Inc. Contact her on Twitter @ccc_susanna.