US severe weather losses projected to be nearly $20bn by end of May, BMS’ Siffert

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A new severe weather update from BMS shows that insurance losses have soared, surpassing $10 billion, and are projected to reach nearly $20 billion by the end of May, warns Andrew Siffert, Senior Meteorologist at BMS.

Last month, BMS issued a warning to the insurance industry, telling industry figures to prepare for another brutal, severe weather season in the U.S.

Since the April update, insurance losses have propelled, and these staggering figures are a result of several significant events, including severe thunderstorms in Dallas and a derecho in Houston, which left over 2.07 million customers in Texas without power.

“The development of the most recent events offers a bit of a wildcard into how much loss can be expected for the insurance industry. Based on similar occurrences in the past, the last several events will cause several billion dollars in damages to the insurance industry.” said Siffert.

Following 2023’s record-breaking insurance industry loss year, insurers are starting to implement changes to limit some of the potential claims.

Some of these changes include higher deductibles and roof-only exclusions, but the full impact of these measures on reported losses may not be understood for years, Siffert warns.

However, despite these efforts, this year’s severe weather losses are already 128% above the 10-year average, with 27 loss events reported by the end of May, which surpasses last year’s total of 23 events.

It is important to highlight that on average, the insurance sector typically experiences 18 to 19 events by the end of May.

Moreover, the BMS Insight provides a comprehensive view of the persistent severe weather, as evidenced by various metrics, which includes the high number of tornado warnings and severe weather days recorded by the Storm Prediction Center.

So far, in 2024, over 1,919 tornado warnings have been issued, and 3,142 hail events have also been reported. As a result, 2024 is shaping up to be one of the most active years for severe weather since 2011.

To counteract these risks, the insurance industry is using advanced tools and research to better understand and mitigate the risks.

A key example of this, is the work of the Insurance Institute for Business and Home Safety (Insurance Institute for Business & Home Safety – IBHS), an organisation that mainly focuses on improving hail and wind damage mitigation.

Looking ahead towards June, Siffert explains that the first week “is certainly starting to light up for potential severe weather on medium-range guidance.”

“Once again, insurance carriers with exposure are mostly for the southern plains, but even the central plains will continue to feel the impacts of continued severe weather in the short term,” he continues.

Siffert also notes that by the middle of June, there may be a weather pattern shift for North America, which has less of an active jet stream.

“The focus of thunderstorm development will be regional and driven by more mesoscale daily patterns and less by synoptically driven patterns. This overall pattern will switch from a trough over the western US to ridging, which is less favorable for tornadoes across the Great Plains. However, this new pattern will bring new concerns to the insurance industry as the abundant amount of fine fuels (grasses) start to dry out west and increase the wildfire risk as increasingly warmer, drier conditions take hold,” Siffert concludes.

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