While the active 2023 severe convective storm (SCS) season led to higher-than-average insured losses, these losses were not extreme, according to Karen Clark & Company’s (KCC) SCS Model.
The KCC US SCS Reference Model offers a realistic depiction of the impacts from SCS events, using advanced simulations of the actual atmospheric conditions during severe storms. Additionally, KCC provides daily SCS footprints for continuous real-time claims and loss estimations.
The year 2023 witnessed notably intense SCS activity, with North America, particularly the US, experiencing the highest frequency and intensity globally.
Throughout the year, 19 individual SCS events each incurred losses exceeding $1 billion, with total annual losses from the peril approximating $50 billion.
Despite these substantial figures, KCC contends that the losses in 2023 were not extreme, suggesting they only appear so due to re/insurers underestimating the risk.
KCC explained, “Because the industry for years has been underestimating the losses from the frequency (aka secondary) perils, most notably SCS, it appears to many (re)insurers as if there is a significant increasing trend. Not only have the models used by many (re)insurers underestimated the risk, sources of market losses have also underestimated the total industry losses from these events.
“But the more accurate KCC SCS Model shows there was nothing extreme or surprising about 2023.”
Looking ahead, KCC warns that potential SCS losses are increasing annually due to population growth and construction cost inflation. The firm predicts that future active seasons could easily exceed the losses seen in 2023, possibly within the next five years.
KCC concluded, “Insurers would like to purchase additional reinsurance cover to smooth out the annual volatility of SCS losses. Many reinsurers have been pulling back from SCS covers because they don’t have the right tools to price the risk accurately.”
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