US SCS insured losses exceed $50bn for the first time: Gallagher Re’s Bowen

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According to reinsurance broker Gallagher Re’s Chief Science Officer, Steve Bowen, 2023 has officially crossed the $50 billion insured loss threshold for US severe convective storm (SCS) activity for the first time on record, based on either a nominal or adjusted basis.

Bowen warns that losses from SCS activity will keep rising.

He explained that so far there have been 17 individual billion-dollar insured loss events and nine multi-billion-dollar events, which have both set annual records for the peril.

Further, activity has continued into the later half of the year and he noted that the loss growth has continued from earlier year events. In several instances, loss totals rose by 50% or more from initial estimates.

Highlighting just how costly the peril in the US has become for insurers and reinsurer, Bowen notes that in six years since 2010, all annual natural catastrophe losses in the country combined did not reach this threshold.

In fact, in only three years on record has US mainland hurricane activity resulted in $50+ billion in insured losses, in 2005 ($135 billion), 2017 ($69 billion), and 2022 ($60 billion), says Bowen. He adds that 2023’s SCS activity would actually place as the fourth-costliest year on record for US hurricane losses.

Commenting on drivers of the activity this year, Bowen explains: “It’s been an above-average year from a frequency of occurrence perspective as we’ve seen more tornadoes, large hail (≥2”), and damaging straight-line winds. We started 2023 with lingering La Niña conditions that tend to drive an earlier start to SCS activity. The Gulf of Mexico has been at record warmth levels most of the year that helps fuel environmental conditions. We’ve had more “stuck” weather patterns that have resulted in more persistent development of storm systems.”

Most of these events have affected populated areas. Bowen notes that the exposure growth and high-risk vulnerability (built environment) aspect is a considerable driver in SCS loss costs.

As climate change further brings weather pattern shifts, the likelihood of more unusual activity more regularly affecting unprepared areas grows, he warns.

“We just aren’t prepared as we should be for SCS events. As an example, in my home state of Illinois, the required code for structural wind speeds is 90 mph. That’s a minimal EF1 tornado.

“The August 2020 derecho (a largely non-tornadic event) brought wind speeds topping 100 mph into Iowa and Illinois. We can and should do better, especially as there are known engineering methods to improve the structural integrity of homes. This doesn’t even begin to touch how hail is the dominant annual driver of SCS losses. In any given year, hail can account for 50-80% of insured SCS losses. 2023 is no exception,” said Bowen.

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