Thunderstorms are by far the costliest "major peril" event
The single costliest type of natural catastrophe for insurers in 2023 isn't hurricanes or earthquakes or volcanic eruptions — it's thunderstorms.
Why it matters: Population growth, expanding cities in storm-prone regions, and climate change-driven trends in severe weather are all helping to vault insurance costs ever higher.
By the numbers: Insured losses from catastrophes are rising at a long-term rate of between 5% and 7% per year, according to insurer Swiss Re.
- The first half of 2023 was pretty typical when it came to non-thunderstorm catastrophes, with about $19 billion in insured losses.
- On top of that, however, was some $35 billion in insured losses from thunderstorms, overwhelmingly in the U.S. but also in places like Italy and New Zealand. That's double the average from the previous 10 years.
- According to Steve Bowen, chief science officer with Gallagher Re, the U.S. is headed for a record year when it comes to insured losses from thunderstorms, referred to in the insurance biz as "severe convective storms."
- Insured losses from such storms come from flooding, hail damage, winds snapping trees onto houses and power lines, and many other effects. The total is likely to reach at least $50 billion this year.
What they're saying: "It's quite rare to set an annual loss record like this for a major peril with four full months left to go in a calendar year," Bowen tells Axios.
Between the lines: Bowen points to the expansion of metropolitan areas as a key driver of growing thunderstorm-related losses.
- "Before any climate influence whatsoever, there's just simply more stuff, more opportunity for things to be damaged," Bowen, a meteorologist, says.
- There are also climate-change related trends in severe thunderstorms. As the seas and air warm, more water vapor and heat enters the atmosphere, allowing for more energy for severe weather outbreaks.
- In addition, severe weather corridors are shifting away from the Great Plains and into more heavily populated regions of the South and the East.
The bottom line: Economic losses from catastrophes totaled $125 billion in the first half of this year, of which about 43% were insured. Expect the former number to rise steadily — and the latter number to fall, as insurance becomes unavailable or prohibitively expensive.