Severe storm losses already in the billionsPosted On: May. 8, 2016 12:00 AM CST
Severe storms and flooding have already resulted in more than $3 billion in insured losses in the United States during the first four months of the year, with Texas hit multiple times during the period.
“The last 60 days alone have been quite costly for public and private insurers across the country, as the typical severe weather season has kicked into high gear,” Steve Bowen, Chicago-based director and meteorologist at Aon Benfield, said in an email. “The state of Texas has been a particular target from large hail and flooding.”
A series of severe storms hit portions of Texas in April and May, dropping hail as large as softballs in portions of North Texas along with heavy rain and high winds.
Mr. Bowen said preliminary data suggests the insurance industry has incurred more than $7.5 billion in losses from winter storms, severe convective storms, flooding and drought so far this year. This includes payouts from National Flood Insurance Program and anticipated claims from the U.S. Department of Agriculture's Risk Management Agency program, he said.
“Most of the losses are attributed to severe convective storms, as hail has been notably costly so far this year,” Mr. Bowen said. “Insured (severe convective storm) losses have topped $10 billion in every year since 2008, and 2016 appears well on its way to topping this threshold as well.”
The Insurance Council of Texas estimated insured losses from this year's hailstorms at nearly $1.4 billion.
“I've had companies tell me that they've paid out more hail and wind claims this year than all of last year combined,” said a spokesman for the council. “And we're in the middle of storm season.”
In addition, April floods in Houston damaged about 40,000 vehicles and caused about $400 million in insured losses, the council spokesman said.
Dan Rees, Boston-based senior analyst at AIR Worldwide, said Houston received about six months' worth of rain in just one three-week period in April.
“Houston is particularly vulnerable to flooding,” Mr. Rees said. “While this was a very intense storm, there was actually a storm last year around Memorial Day that also caused flooding in a different part of Houston.”
“It's been floods, floods, more floods,” said Duncan Ellis, New York-based U.S. property practice leader at Marsh L.L.C. “The No. 1 cat loss peril within the U.S. continues to be floods. We've seen significant flooding down in Louisiana and Mississippi and once again in New Orleans.”
Mr. Ellis said clients need to understand what their property insurance actually covers.
“One policy may see extreme heavy rain that inundates your factory, or inundates your building, and call that surface water,” Mr. Ellis said. “It doesn't fall under the flood definition and, as such, it's treated differently, meaning it will have a different deductible and potentially different coverage from a limits standpoint. Other policies may call very, very heavy surface water a flood and, as such, it will have a different deductible.”
Verisk Analytics Inc.'s Property Claim Services unit said insured losses for all U.S. wind and thunderstorm events have reached $3.9 billion as of April 29. This does not include multiple events in the past few weeks.
Despite the devastation, “the counts for hail and wind are almost the exact count for a typical year,” said Scott Stransky, Boston-based assistant vice president in AIR Worldwide's research and modeling group. “In fact, the tornado count is a little bit below average.
“The hailstorm count was right on average,” he said, “but you get a big hailstorm hitting a big city like San Antonio, and then it becomes notable, newsworthy and loss-causing, and then people start talking about it.”
David Finnis, Atlanta-based executive vice president and head of property broking at Willis Towers Watson P.L.C., said first-quarter commercial property insured losses were “relatively benign. If you look at the last two years of property claims for the U.S., the numbers have been down ... and it's just continuing the trend. It's very quiet. Obviously everybody is gearing up to see what hurricane season brings, and that starts on June 1.”
Various forecasters have predicted that the Atlantic hurricane season that runs through Nov. 30 will have 12 to 14 named storms, with six to eight being hurricanes and three to four being major hurricanes.