It seems that even in years without major U.S. windstorm losses, there’s little in the way of good news in the world of catastrophe risks. 

As several reports have shown over the past month, 2023 did provide some relief for commercial policyholders and insurers battered by hurricanes over the past two decades, with no major U.S. hurricane loss events during the year. 

But on the negative side of the catastrophe loss ledger, insured global losses again exceeded $100 billion in 2023 — the fourth year in a row. Instead of hurricane losses, though, the biggest loss category last year was severe convective storms.

The combination of hail, flooding and strong winds that convective storms can bring is not new, but, whether you blame climate change, demographic shifts or fate, there’s no denying the fact that losses related to the events are increasing. According to Gallagher Re, severe convective storm losses topped $71 billion globally last year and hit a record $60 billion in the United States alone — about double the totals in the prior two years.

Given the loss trends, property underwriters are likely to press for more rate increases this year, a phenomenon that risk managers must be weary of given the hardening rate environment of the past five years. According to Business Insurance’s pricing chart tracking major industry rate surveys, after coming down from steep rates hikes in 2020-2021, commercial property rate increases accelerated significantly again last year. 

On the reinsurance side, the year-end property reinsurance renewal was not as bad as in 2022, but rates remain elevated and attachment points high, so property insurers are seeing little in the way of relief in the cost of their own protections to pass on to primary policyholders, and increasingly they are left holding most of their losses.

To a certain extent, policyholders can turn to captives to manage the hard market. Those vehicles can provide flexibility and leverage with insurers, but captive owners also need to cap significant catastrophe exposures with reinsurance, and pay the current elevated rates for the coverage, so they are not the complete answer. 

It seems there is no simple solution. The limited new capacity entering the property insurance and reinsurance market appears to be holding the line on rates with incumbents, dashing any hopes that the next downward shift in the pricing cycle will start soon.

Instead, policyholders may have to satisfy themselves with incremental improvements derived from improving the resilience of their buildings and tapping creative minds in the industry to provide structured solutions to ease the burden. Collaboration won’t create a silver bullet, but it may go some way to easing an increasingly intractable problem.