The industry is facing “a substantial increase” in the level of losses arising from so-called secondary perils, Bowen told The ReInsurer.
Wildfires, floods and droughts are all causing (re)insurers larger losses than in the past, but Bowen said SCS is the most notable example of a secondary peril taking a heightened toll on the industry.
“We’re starting to see losses very regularly surpassing $10bn every year [for SCS],” said Bowen.
“We always want to talk about what is a new normal, well that is definitely a new normal. We’re at 13 consecutive years now where SCS losses in the US alone have surpassed $10bn, and in fact this year we’re running just behind 2011 in terms of the overall aggregate cost for the year.”
In 2011, the (re)insurance industry faced losses of well over $20bn from tornado and associated storm losses in the US.
“It’s been a very expensive year and a lot of that can be attributed to simply more and more people moving into these traditional tornado alley belts, hail alley areas, and other areas that are really conducive to severe derechos and things like that,” explained Bowen.
While the insured losses from SCS are increasing, Bowen said the frequency of such events is not on the rise. However, he said that the severity of each event is increasing.
“We are seeing more hail per event, more tornadoes per outbreak and there is some initial literature that’s starting to come out which confirms that,” he said.
“There’s still a lot of uncertainty” regarding what impact climate change is having on SCS, Bowen explained.
“In fact, if you’re talking about which peril do we know best in terms of how climate change is directly affecting the peril itself, severe convective storm is actually one of the ones we understand the least,” he added.