Rising insured losses caused by severe convective storms can largely be traced to substantial expansion in exposure values in affected geographies rather than significant meteorological shifts, experts say.

The tornadoes, hailstorms and high winds produced by such storms are tearing through areas with higher insured values as a result of several factors, including population expansion and inflation.

Losses due to severe convective storms have been driving annual catastrophe losses for several years, and 2023 marked the first time insured natural catastrophe losses topped $100 billion without a single, larger event driving the total.

Global insured losses from natural catastrophes totaled an estimated $123 billion in 2023, according to a report from Gallagher Re, the reinsurance brokerage of Arthur J. Gallagher & Co. Severe convective storm losses accounted for about 58%, or $71 billion, of the total, with $60 billion of the losses arising from claims in the United States, where six of the year’s top 10 costliest insured events were severe convective storm events.

“There’s just more of an expanding target of exposure, meaning more people and stuff that’s in harm’s way that can be affected by these events,” said Steve Bowen, Chicago-based chief science officer with Gallagher Re.

Nine of the nation’s 15 fastest-growing cities in 2022 were in the South, according to the U.S. Census Bureau. Six of those are in Texas, with Georgetown having the highest rate of growth among all U.S. cities and towns with at least 50,000 people.

“Severe convective storms are relatively small-scale events. The size of SCS losses therefore depends quite a bit on the density of exposed value in the area affected by SCS,” said Elisabeth Viktor, Zurich-based senior natural catastrophe specialist for Swiss Re Ltd.

“The expansion of urban areas, especially in regions prone to SCS, such as Texas, is certainly a driving factor of the increase of insured SCS losses we’ve seen in recent years,” Ms. Viktor said.

Homeowners are seeing the impact from North Carolina, where the North Carolina Rate Bureau filed a request with the state insurance department for an average 42.2% increase in homeowners insurance rates, to Oklahoma, where policyholders are seeing double-digit property insurance increases and the nation’s tallest structure, at some 1,900 feet, has recently been proposed for Oklahoma City. The North Carolina Rate Bureau request was rejected by North Carolina Insurance Commissioner Mike Causey on Feb 6.

Michal Lörinc, head of catastrophe insight in Prague for Impact Forecasting, a unit of Aon PLC, said some data suggests that up to 80% of the increase in insured losses from severe convective storms is due primarily to factors such as increasing population exposure and inflation driving up the cost to repair or replace structures due to increased costs of materials, labor and transportation, among other things.

While much of this increased loss activity is occurring in the U.S., Mr. Lörinc said Europe is seeing some similar dynamics. He noted that Italy sustained a major loss event from severe convective storms in 2023.

“Certainly, the population has grown in the interior part of the U.S. and also the southeast,” said Gregory Mann, Atlanta-based U.S. property placement leader for Marsh LLC.

Inflation has also played a role, Mr. Mann said. “As far as what a loss was five years ago, it has certainly increased dramatically to what it is today,” he said.

“The individual size of a loss has been increasing, caused by, among other things, more valuable buildings and a rise in material costs,” Ms. Viktor said.

Insurers have reduced limits, as they practice “capital management” to avoid larger concentrations of risk on their books, Mr. Mann said. A policyholder might still be able to secure desired limits in the marketplace but might have to build the tower with capacity from several insurers instead of a single, large limit from one, he said.

“Each of them brings a minimum premium and a minimum fixed cost … so that adds overall cost to the program,” he said.

“There’s essentially more targets that are now vulnerable to those natural hazards” such as severe convective storms, said Sarah Dillingham, Atlanta-based senior director of meteorology for the Insurance Institute for Business & Home Safety, an independent, nonprofit research organization supported by the insurance industry.

In addition, the resilience of buildings varies due to the labyrinth of building codes and enforcement at the state and local levels. “In places like the Southeast and Ohio Valley … we see some vulnerable housing, and that has to do with the building code environments and potentially local construction practices,” Ms. Dillingham said.

The IBHS does substantial research on roof tiles’ hail resiliency, as well as tile and metal roofs, and is expanding that research to exterior wall coverings, Ms. Dillingham said. More defensive roofing materials may cost more but show evidence of added resilience.

More Densely populated areas at risk as Tornado Alley shifts east

Although the principal driver behind the rising insured losses due to severe convective storms is increasing exposure values, evidence suggests that the most commonly affected region may have expanded eastward.

Commonly called “tornado alley,” the region previously largely comprised sparsely populated areas of the U.S., but an eastward shift would be toward more populous areas with greater exposure values.

“There are indications that the region of high SCS activity could be moving towards the east and southeast of the U.S. With this potential shift, it could become more likely for SCS events to affect regions that are more densely populated and generally less prepared to withstand such events,” said Elisabeth Viktor, Zurich-based senior natural catastrophe specialist for Swiss Re Ltd.

From 1950 to 1980, large outbreaks of tornadoes occurred most often in the region encompassing northern Texas, eastern Oklahoma and Western Arkansas and Missouri, according to a recent paper in Scientific American. Between 1989 and 2019 the locus shifted eastward, covering western Kentucky and Tennessee, plus northern Mississippi and Alabama, it said.

“We have noticed that the areas in which things occur is expanding eastward — we’re seeing an increasing frequency in places east of the Mississippi like the Southeast and Ohio Valley,” said Sarah Dillingham, Atlanta-based senior director of meteorology for the Insurance Institute for Business & Home Safety, an independent, nonprofit research organization supported by the insurance industry.