Insured losses from May's 'Ring of Fire' near $2.5 billion, says new report

A “ring of fire” weather system that took place earlier this month is expected to generate $2.5 billion in insurance claims to residential and commercial properties and automobiles, according to a new report from Karen Clark and Company.

The extreme weather event created damage from hail and wind, and affected most states along the east side of the Rocky Mountains, with the most damage occurring in the Midwest, Northeast and Mid-Atlantic regions.

The report says 12 states — Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, New York, Ohio, Pennsylvania, and Virginia — will likely experience insured losses in excess of $100 million each.

“Insured SCS [severe convective storm] losses are dominated by hail and straight-line winds, not the occasional F4 and F5 tornadoes that capture the media attention,” said Karen Clark, president and CEO of Karen Clark & Co (KCC).

“This particular ring-of-fire type meteorological event results in lower levels of damage but across a very wide area, and insured losses can easily aggregate into the billions.”

Related: Tornado and severe weather insurance checklist

Assessing the damage

This ring of fire began on May 11 and continued through May 16. The report explains that the weather system began with an upper-level blocking pattern that set up off the West Coast and prevented low-pressure systems from progressing across the country. At the same time, a moderate but steady circulation set up over the Southeast bringing warm, moist air from the Gulf to the Ohio River Valley.

Upper air winds were light within the region, but along the borders of the subtropical air mass, wind shear was high enough to support the formation of super-cell storms, KCC reports. Most of the storm activity was along an arc from Texas to Kansas, through the Ohio Valley to the Mid-Atlantic states, a setup meteorologists refer to as a “ring of fire.”

Researchers at KCC say this event created “widespread instability and consistent but moderate southerly flow over the Great Plains.” Due to a lack of strong upper-level winds, there was a limited number of rotating supercells, and as such, most of the damage was caused by hail and straight-line winds rather than tornadoes.

By the time the ring of fire fizzled out, the storm had reached wind gusts of 58 mph, creating 500 hail reports, 28 tornadoes, and more than 600,000 power outages.

More frequent storms

Clark says the frequency of multi-billion-dollar severe convective storm (SCS) events is increasing, and insurers need a credible way to estimate their losses from these events.

“In the past, it’s been challenging for the catastrophe models to credibly simulate high frequency, low severity events, such as SCS,” Clark explains.

“The new KCC SCS model, based on the physics of the atmosphere, can accurately project the hail, wind and tornado intensity footprints (shown in the map) so insurers can estimate their numbers of claims, average claim severity, and total losses as the event is unfolding.”

Related: The rise of CAT claims