The growing frequency and severity of convective storms in southern U.S. states is increasingly hampering the ability of insurer and reinsurers to effectively diversify their portfolios, a new AM Best commentary says.

Insurers and reinsurers rely on geographic diversification in underwriting to maintain a stable, profitable portfolio, according to Best’s Commentary, “Convective Storms Create Difficulties in Diversifying Portfolios.”

In recent years, the commentary noted, this has become more difficult due to the growing number and increased intensity of convective storms and the wider geographic areas where storms are occurring.

Recent convective storms (e.g., severe thunderstorms, hailstorms, tornadoes, derechos) that spread through Texas, Louisiana, Arkansas and Mississippi hit Gulf Coast and nearby states typically impacted by hurricanes, adding to the perils threatening the results of property writers in those states, the commentary said.

These storms, striking during hurricane season, add to the hazards insurers face during these months, said Christopher Graham, senior industry analyst, Industry Research and Analytics, AM Best, highlighting the greater concentration of risk from the multiple perils.

The report includes lists of insurance groups or companies writing property in Arkansas, Louisiana, Mississippi and Texas with the high geographic concentrations in each state. For Texas, the list includes those with 50 percent or more of their property books in the state. For the other states, the cutoff point is 25 percent. Single-state writers, which face greater potential impacts from the storms, show up on all the lists, but State Farm remains the largest writer of overall premiums in each state.

Convective storms through June 2023 in the U.S. have been larger than those seen in the first-half 2022. As a result, “the year is shaping up to be a difficult one for insurers as peak hurricane season looms,” AM Best noted.