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2024 Severe Weather Losses a Wake Up Call for Exposure Management

2024 Severe Weather Losses a Wake Up Call for Exposure Management

This year is on track to be another record-breaking year for weather-related disasters in the United States. By mid-August, the nation had already experienced a staggering 19 confirmed billion-dollar weather and climate-related events, including tornados, hail, hurricanes, wildfires, and winter storms. Since the U.S. government started tracking the economic toll of weather-related events through seven months of 2024, we are now surpassing $49.6 billion, making it the costliest on record.

Tornados: The Most Active Season Since 2011

A defining feature of 2024's weather has been the frequency and severity of tornados. As of mid-August, there have been 1,325 confirmed tornados, with the final cost assessment still pending by the National Centers for Environmental Information (NCEI). Noteworthy is that of the 19 billion-dollar-plus severe convective storm events, 11 involved tornados, causing significant damage to homes, businesses, infrastructure, and agriculture.

To understand how extraordinary this year's tornado activity has been, consider this: The average number of billion-dollar disasters caused by severe storms, including tornados, from 2014 to 2023 was about 13 per year. The United States exceeded that average in 2024, with four months remaining. 

Where have the Tornados Occurred? 

As noted in the map below, large areas of the midwestern plains and the Ohio River Valley have been under a significant number of tornado watches and warnings as of August. States like Nebraska, Iowa, Kansas, Illinois, and Missouri have been particularly affected compared to other regions. While the Southeast, including the Emerald Coast and southern Georgia, has also faced some tornado activity, it has been less active than the central U.S.

Overall, data for 2024 (January through July) confirms this trend, revealing the highest concentration of tornado watches stretching north from East Texas through East Kansas-Southwest Missouri into West Iowa. West Kentucky and the Florida Panhandle have also experienced a significant number of tornado watches during this period. 

Opterrix map showing areas of the US with the highest number of tornado watches in 2024, with historical tornado tracks colorized by EF strength.

Map of the number of 2024 tornado watches by U.S. county, with historical tornado tracks colorized by E.F. strength.  

 

Monthly Highlights of Tornado Activity January - July 2024

  • January: Started with significant tornado outbreaks in Florida, Alabama, and North Carolina.
  • February: 52 preliminary tornados were reported, below the 1991-2020 average. A severe weather system caused $1.3 billion in damages. In addition, Wisconsin experienced its first February tornado – the furthest north recorded this early in the season.
  • March: There were 66 confirmed tornados, below the 30-year average. A tornado system from March 13 to 15 caused $5.9 billion in damages.
  • April: An outbreak that produced more than 140 tornados across several central and southern states, causing widespread damage to homes, businesses, and other infrastructure.
  • May: Record-breaking 570 tornados, the highest count ever recorded in May. Three separate billion-dollar tornado disasters occurred.
  • June: Texas experienced a particularly active month with 112 confirmed tornados.
  • July: 210 tornados were reported, well above the 1991-2020 average. Notable outbreaks occurred on July 8 and 15. Hurricane Beryl and a derecho contributed to the high count.

The above confirms this is the highest number of tornados in this period, only behind 2011, since record-keeping began in the 1950s.

Opterrix map showing monthly analysis of tornado tracks so far in 2024. May 2024 set a record for 570 tornado reports.

Map of the tornado tracks that occurred in 2024, colorized by month.  

 

The Rising Cost of Severe Convective Storms

The increasing frequency and severity of severe convective storms profoundly affect insurance loss activity. Remarkably, in the last five years, including 2024, there has been a record increase in insured losses associated with severe convective storms.

Compounding this rising cost is inflation (cost of goods) and population growth in tornado-prone areas, expanding the "target" for these storms, resulting in higher insured values at risk. A direct outcome is the need for increased rates, causing significant pricing increases for homeowners in affected regions. 

Hurricanes: Beryl and Debby

While the 2024 season has been particularly active for tornados, the U.S. has also seen a pair of notable landfalling hurricanes. Hurricane Beryl, an early arrival for the 2024 Atlantic hurricane season, reached Category 5 strength before slowing down over the Yucatan. Making a second landfall in Texas as a Category 1, Beryl brought strong winds and heavy rainfall to the Houston area, leading to widespread power outages, infrastructure damage, and devastating flooding. The storm impacted areas beyond Texas, with severe flooding and tornados reported in Louisiana, Arkansas, Missouri, and parts of the Midwest and New England.

Moody's RMS estimates that U.S. insured losses from Hurricane Beryl will likely fall between $2.5 billion and $4.5 billion, including damage from wind, storm surge, and coastal and inland flooding. The NCEI estimates Beryl's total damages to be $6 billion in insured and uninsured losses. 

Map of Hurricane Beryl's path through Texas after landfall and three-day rainfall accumulations caused massive flooding in Houston and eastern Texas.

Map of Hurricane Beryl's storm track and 3-day rainfall after making landfall on July 8. 

 

Although Hurricane Debby made landfall as a relatively weak Category 1 hurricane, its slow movement and prolonged heavy rainfall caused extensive flooding across a large portion of the Eastern U.S. Debby's unusual path, which included restrengthening over the Atlantic and a slow crawl up the East Coast, led to inundation from Florida to New York. Flash flooding, sometimes with rainfall exceeding 3 inches per hour, hit rural communities particularly hard, forcing evacuations and damaging infrastructure in areas like South Carolina and the Finger Lakes region. Storm surge along Florida's Gulf Coast also caused significant flooding and property damage.

Moody's RMS estimates the insured loss from Hurricane Debby in the U.S. private market to approach $1.5 billion. These estimates include insured losses from wind, storm surge, and inland flooding.

Opterrix map of Hurricane Debby's path up the East Coast and 7-day rainfall accumulations showing areas of significant flooding.

Map of Hurricane Debby's storm track and 7-day rainfall after making landfall on August 5. 

 

Conclusion

2024 is already a stark reminder of the increasing frequency and intensity of extreme weather events. The exceptionally active tornado season and the impact of hurricanes like Beryl and Debby have resulted in substantial financial losses and widespread disruption in the first eight months of the year. Loss totals are likely to increase as we enter the peak of hurricane season, during which forecasters predict the development of 5 to 10 more hurricanes through the remainder of the 2024 Atlantic hurricane season.  

Insurers and risk managers must remain vigilant and prepared for the challenges posed by such weather patterns while supporting efforts to mitigate the long-term effects of climate change.

 

The Answer: Exposure Management

Exposure management isn't just a buzzword but a critical component of an insurer's risk management strategy. Here's why:

  1. Risk Mitigation and Capital Optimization: Effective exposure management helps insurers mitigate the risk of catastrophic losses from a single event or accumulation of events. By maintaining a balanced portfolio and setting risk appetite limits, insurers can ensure adequate capital reserves to cover potential claims and remain financially stable.
  2. Underwriting Profitability: Exposure management allows insurers to make informed underwriting decisions by understanding the potential risk associated with each policy. This helps optimize pricing, terms & conditions, leading to a more profitable and diversified underwriting portfolio.
  3. Regulatory Compliance: Insurance regulators require insurers to maintain adequate capital and reinsurance arrangements to cover potential losses. Exposure management helps demonstrate compliance with these regulatory requirements.
  4. Reinsurance Optimization: Detailed exposure analytics enables insurers to purchase appropriate reinsurance (cost and coverage) to protect against catastrophic losses, ensuring adequate risk transfer and financial protection.
  5. Business Continuity: Effective exposure management is critical for business continuity in terms of operations and meeting obligations to policyholders. 

Opterrix: A Game-Changer for Insurers

Opterrix is a leader in exposure management tools. Their risk intelligence platform, tailored for the insurance sector, uses cutting-edge analytics, machine learning, real-time data, and unparalleled geospatial technology to give (re)insurers an unmatched understanding of their risk exposures. 

Key Features:

  • Weather monitoring and alerts send customized reporting to stakeholders
  • Address-specific data to identify the exact exposures impacted
  • Capacity allocation and aggregate management tools
  • Automated moratoriums prevent the binding of at-risk policies
  • Policyholder notifications to proactively communicate with at-risk customers
  • Claims Predictions to optimize claims resource management and loss reserving
  • Address-level peril and blended risk scoring to inform pricing
  • Extensive library of real-time and historic weather peril data

Looking Ahead: A Strategic Imperative

By embracing advanced exposure management tools like those offered by Opterrix, insurance carriers, and risk managers can enhance their resilience to natural disasters, better protect their policyholders, and take proactive measures to safeguard the future in the face of a changing climate.

Discover how Opterrix can empower you to prepare and respond to severe weather proactively.

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