Severe thunderstorms and hail: A past, present and future risk
The hail threat is growing and has unique cumulative effects. Here's how insurers can better address the risk.
Severe thunderstorms and associated hail have caused more than half of annual reported insured losses since 1985, according to The Verisk Severe Thunderstorm Model for the United States.
A large outbreak can cost insurers $25 million or more, but even smaller events in succession can add up for an insurer with concentrated exposure in affected areas.
This article — the second in a series — explores the growing scope of the hail threat, its unique cumulative effects, and how insurers can better address all aspects of the risk.
Over the past ten years, the most severe hail behavior occurred in 2016 and 2019. There was more activity in 2022 than in 2021. However, the numbers still were less than the 10-year average of 5,086 hail events and lower than the 2019 and 2020 totals, according to the National Oceanographic and Atmospheric Administration (NOAA). Events vary in size and severity, and frequency fluctuates; storms generating 3,000 or more hail claims average 10 to 20 per year in the United States.
Outbreaks that generated widespread, damaging hail have extended from the Midwest’s traditional “hail alley” into Eastern states and denser population centers. One 2022 storm produced a rare hail event in the Los Angeles area. Seasonality is also shifting from its historical concentration in spring and summer. March and August hail events were down significantly over the past ten years, but the 2022 season stretched into October.
Hail extends its reach
U.S. properties exposed to at least one damaging hail event were up nearly 10% in 2021 over 2020, according to Verisk LOCATION® data. More than 6.8 million properties were affected. Pennsylvania and Maryland entered the top ten states for hail-affected properties in 2021 as damaging events marched eastward — a shift worth noting for insurers writing properties outside the traditional hail alley.
Through the roof
Hail is most destructive to roofs, potentially leaving cumulative effects over multiple events. It’s critical for insurers facing this peril to have a complete picture of roof risk, encompassing material, age, condition and replacement costs. Roof condition tends to be worst in regions with the highest frequency and severity of hail or wind events.
This tendency points to the potential for more severe roof claims when damage isn’t detected for months or years — and then becomes subject to the high cost of roof repair or replacement. Some 1.8 million residential and 41,000 commercial claims contained roofing line items in 2022, accounting for about 38% of residential and 31% of commercial assignments, respectively.
The expanding threat from potential future hail events and the damage already done present a series of challenges, and data to help insurers capture the entire risk may need to combine current, forward-looking and retrospective elements such as:
- Update-to-date, component-based property repair and replacement costs;
- Modeling based on climate and weather science to understand risk trends by frequency, severity and geography; and
- Intelligence on recent activity to highlight where pre-existing damage and wear may exist, especially on roofs.
With these elements, insurers can better approach hail risk with reliable underwriting and pricing, a well-calibrated risk appetite and a solid grasp of portfolio-level exposure.
Dr. Arindam Samanta (Arindam.Samanta@verisk.com) leads property underwriting product management efforts in the areas of weather and natural hazards, including FireLine®, Verisk’s wildfire risk management tool for the insurance industry, and a range of other property risk assessment tools related to hail, wind, and lightning. Additionally, he supports ISO’s personal lines product innovation pipeline and agenda. Dr. Samanta did his academic and research work at the Indian Institute of Technology (IIT), Caltech, and Boston University.
Tim Greene (TGreene@verisk.com) joined Verisk in early 2021 where he has managed business development and designed storm-related impact metrics and analytics for the weather product group. He works extensively with the insurance industry to grow and continuously improve Verisk’s leading weather solutions.
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