In 2023, the United States faced an unprecedented property risk crisis, highlighted by a significant disparity between insurance policy pricing and the escalating risks posed by natural catastrophes. The surge in severe convective storm (SCS) activity, including severe thunderstorms, led to an unprecedented amount of insured losses throughout the year, impacting millions of homes across the nation.

Severe thunderstorms, characterized by straight-line winds, damaging hail, and destructive tornadoes, emerged as the primary drivers of insured losses in 2023. The widespread occurrence of these SCS losses, which included numerous billion-dollar incidents, were equivalent to the financial impact of a major hurricane.

Among these perils, hail emerged as the leading cause of insured loss, affecting a vast expanse of the U.S. Unlike tornadoes and straight-line winds, hail occurrences are frequent and can inflict considerable damage. The extent of the crisis is evident in the staggering number of single- and multifamily homes affected by hail, surpassing 10 million across the contiguous U.S. during the year.

While hailstorms typically peak during late spring and summer, the 2023 season witnessed significant activity throughout the year, with large hail impacting over 100,000 homes on multiple occasions. CoreLogic’s Weather Verification Technology recorded 141 days with large hail in 2023, the highest figure since 2003.

The impact of these storms was particularly pronounced in Texas, the Southeast, and the Plains, where densely populated areas experienced substantial damage. However, not all parts of these states experienced this same increase in hail activity.

A closer examination of specific events, such as the severe thunderstorm activity between June 11 and 16, 2023, reveals the severity of the situation. Large hail and strong straight-line winds ravaged parts of the Dallas-Fort Worth area, resulting in insured losses estimated between $7 and $10 billion, with hail accounting for 95% of the damages.

While climate change may play a role in exacerbating the volatility severe weather patterns, data suggests that changes in exposure, including residential and commercial-residential construction growth, are the predominant contributors to escalating losses. The increase in housing units across the U.S., coupled with rising construction costs, has amplified the financial toll of severe convective storms.

These challenges underscore the importance of high-quality input data for effective underwriting, pricing, and risk management strategies. Accurate assessments of building characteristics and real-time meteorological data are essential for enhancing resilience and mitigating catastrophic losses.

The CoreLogic^® 2024 Severe Convective Storm Risk Report serves as a stark reminder for the insurance industry and policymakers alike, urging proactive measures to address the evolving property risk landscape. By embracing data-driven approaches and fostering collaboration, stakeholders can better prepare for future challenges and safeguard communities against the growing threat of severe weather events.

By Saumi Shokraee

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