Insured losses from severe convective storms (SCS) in the first half of 2024 have accounted for the majority of global catastrophe losses, with the United States experiencing a significant increase in insurance payouts.
According to The Demex Group, a risk analytics company that provides reinsurance solutions for SCS, this rise in losses poses a considerable challenge to insurers and policyholders due to the limited availability of reinsurance protection for such events.
Aon's H1 2024 Global Catastrophe Recap reported that US SCS insured losses reached $39 billion in the first six months of the year. Four major SCS events during this period contributed nearly $15 billion to the total insured losses.
Bill Clark, CEO of Demex, emphasized the ongoing impact of these storms on both property owners and insurance companies. In 2023, numerous US insurers faced ratings downgrades, and four companies became insolvent as a result of financial losses related to SCS.
While traditional reinsurance is commonly available for major catastrophes like hurricanes and earthquakes, it is less accessible for SCS.
Clark pointed out that secondary perils, including SCS, hail, extreme temperatures, and flooding, have been increasing in both frequency and severity, posing a growing risk to the insurance industry.
Clark also noted that the accumulation of losses from these secondary perils represents a significant threat to insurers and could limit consumer access to insurance. Aggregate reinsurance policies for such events are generally unavailable, exacerbating the risk.
To address this challenge, Demex announced that it has developed a parametric reinsurance solution known as Retained Climate Risk Reinsurance (RCR Re) specifically designed for secondary perils.
This solution, the company said, enables insurers to protect their balance sheets by securing coverage for losses exceeding a predetermined threshold. Demex collaborates with reinsurance brokers and companies to arrange this coverage.
Clark said that Demex evaluates the potential for losses from secondary perils by analyzing the conditions that lead to severe convective storms. The company uses historical claims data and verified weather information to estimate potential losses for insurers.
Munich Re's analysis indicates that severe thunderstorms in the US have already caused more than $34 billion in insured damages during the first half of the year, with expectations that losses from SCS and other secondary perils will remain substantial.
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