Invited Speaker in Climate Linked Economics: Severe Convective Storms: Insights from Industry Experts and the Role of Reinsurance

The escalating impact of severe convective storms (SCS) on the insurance market has reached a critical juncture. These storms, characterized by intense thunderstorm winds, hail, and tornadoes, are becoming increasingly frequent and severe in some areas, driven by the accelerating effects of climate change. As a result, the insurance industry faces substantial financial losses that challenge its stability and resilience. This presentation examines the multifaceted impact of SCS on the insurance market and explores innovative solutions to mitigate these challenges.

Recent trends indicate a significant surge in economic losses driven by SCS. Factors such as climate change, economic growth, urbanization, and higher repair costs are contributing to the surge. Notably, 2023 saw global insured losses from SCS reach $70 billion, more than double the previous five-year average. Insights from experts like Dr. Marshall Shepherd and Dr. Victor Gensini will be featured, shedding light on the shifting patterns of tornado activity and the expected increase in tornado outbreaks. The presentation will also explore the escalating financial burden on insurers and homeowners, emphasizing the growing significance of secondary perils like SCS, which now surpass primary perils such as hurricanes in terms of financial impact.

We will provide insights from insurance industry experts and examine the critical role of reinsurance in addressing the challenges posed by severe convective storms. Through personal accounts and expert opinions, we will illustrate the real-world impact of these storms on individuals and communities. The financial distress faced by insurers, leading to higher premiums, reduced coverage, or complete withdrawal from high-risk markets, will be highlighted. The evolving landscape of the reinsurance industry will be discussed, where reinsurers play a crucial role in spreading risks for natural catastrophes. As climate change exacerbates volatility in the frequency and severity of weather events, reinsurers are becoming more conservative, leading to higher costs and reduced availability of coverage. This has a domino effect, impacting primary insurers and ultimately, policyholders. The presentation will underscore the need for innovative solutions to ensure the resilience of the insurance market. “It’s becoming an untenable situation,” said Sridhar Manyem, senior director of industry research at AM Best, a company that rates the financial strength of insurers.

This presentation aims to provide a survey of the escalating impact of severe convective storms on the insurance market, highlighting both the challenges and the innovative solutions needed to build resilience in the face of climate change. By examining recent trends, expert insights, and cutting-edge reinsurance products, we aim to foster a collaborative approach to enhancing the stability and sustainability of the insurance industry in an era of increasing climate volatility.