Insured Losses From Severe Convective Storms in US Top $50B for 1st Time: Aon Report

November 6, 2023 by

Insured losses from severe convective storms in the United States continued to increase during the third quarter, surpassing the $50 billion mark for the first time on record and accounting for roughly 60% of all global insured losses, according to Aon plc in its Q3 Global Catastrophe Recap report.

In the U.S., there were at least four individual billion-dollar insured loss events from severe convective storms (SCS), which will likely increase to seven events due to continued loss development, the report said.

In addition, SCS (also known as a secondary perils) brought two individual billion-dollar SCS events in Europe, including in northern Italy where hailstorm activity during the month of July resulted in record-breaking insurance payouts for the country, potentially reaching €2 billion ($2.1 billion).

Another significant industry event was the wildfire that destroyed the town of Lahaina, Hawaii, bringing insured losses of $3 billion, the report said. (Wildfires are another type of secondary peril).

Q1-Q3 Insured and Economic Losses

Total aggregated insured losses from natural disasters in the first three quarters were estimated to exceed $88 billion, which is 17% higher than the 21st century annual average of $75 billion. Global SCS caused 70% of insured cat losses in first nine months.

Disaster events in the United States accounted for roughly three-quarters of global insured losses in Q1-Q3 2023, reaching approximately $65 billion. Aon said this is already higher than the long-term annual average and median.

Global economic losses from natural disasters in the first three quarters of 2023 were preliminarily estimated at $295 billion, above the 21st -century Q1-Q3 average of $265 billion and approaching the 21st-century annual average of $310 billion. (Economic losses include insured and uninsured losses).

The EMEA region recorded the highest portion of global economic losses with the current estimate of $134 billion, primarily driven by earthquakes (including the Turkey and Syria earthquakes in February and the Morocco earthquake in September). The portion of the total EMEA economic losses, which was covered by insurance, was significantly lower than in the United States, due to the large protection gap for major events, such as earthquakes, floods, and droughts, the Aon report noted.

“It is currently estimated that by the end of September, the world saw at least 47 individual billion-dollar disasters, which was the fifth-highest number on a price-inflated basis,” the report said.

The aggregated death toll from 2023 natural catastrophe events breached 75,000 during the same period, making 2023 the deadliest year since 2010, Aon added.

Aon cited additional notable natural disaster events that took place during Q3 2023 including:

  • Widespread flooding in Beijing and several Chinese provinces in early August resulted in the costliest global economic loss event of Q3 at $30 billion.
  • On Sept. 8, a magnitude-6.8 earthquake occurred in the Moroccan High Atlas Mountain range, claiming nearly 3,000 lives, injuring more than 5,600 people, and causing significant material damage across the affected area.
  • Destructive flash flooding in northeastern Libya in early September damaged thousands of buildings in Derna city and ranked as the second deadliest event of the year, with more than 4,300 fatalities.
  • Hurricane losses in the U.S. were lower than average in Q3, which is considered the peak of the Pacific and Atlantic hurricane seasons. Two notable tropical systems, Hilary and Idalia, still caused significant losses that, collectively, reached into billions of US dollars.

“Global natural catastrophes killed many people and caused significant structural and economic damage during the first nine months of 2023,” commented Michal Lorinc, head of Aon’s Catastrophe Insight, in a statement.

“Wildfire and severe convective storm were once again highly prominent, and Aon’s research reveals that both are becoming increasingly costly to insurers, communities and governments. In the U.S., around 80% of SCS loss growth can be explained by exposure change – highlighting the need for insurers to understand underlying exposures in their portfolios,” Lorinc added.