Severe storm systems leave more in their wake than death and destruction – including insurance claims. And they’re piling up.
Strings of destructive storms in the U.S. throughout March are expected to cost the insurance industry more than $2 billion, according to a report from Aon Benfield, the global reinsurance branch of London-based Aon.
The most damaging was an early March system that dropped dozens of tornadoes throughout the Midwest and parts of the South, downing power lines and damaging buildings, before heading east and wreaking havoc there, the report said.
Total economic losses for that one storm system, which thundered through March 6-10, were an estimated $1.7 billion. Insurance claims reached about $1.2 billion, according to the report.
Thunderstorms – including losses from damage caused by hail, wind and tornadoes – have surpassed hurricanes as the costliest peril for the insurance industry in the U.S. over the past decade, said Steve Bowen, director and meteorologist of Aon Benfield’s impact forecasting division. Fewer hurricanes have been making landfall, but thunderstorm events have become increasingly damaging.
“While the individual losses themselves may not be as costly as hurricanes, it’s sort of death by a million paper cuts,” Bowen said. “You get all of these events that add up.”
Every year since 2008, the insurance industry has paid out at least $10 billion for damages from thunderstorms in the U.S., according to data from Aon Benfield. The costliest year during that period was 2011, when the bill topped $29 billion. The total is already nearing $5 billion this year, up from $4.8 billion through March of last year.
All of that and we’re not into the heart of severe weather season yet, Bowen said. “May is usually the peak month when it comes to tornadoes.”
The onslaught of severe thunderstorms raining down on the nation doesn’t necessarily mean higher premiums for customers, said Michael Barry, a spokesman for the New York-based Insurance Information Institute, an industry trade group.
Rates are based on actual and anticipated losses an insurer is going to see in each state, Barry said. One bad year likely won’t cause a rate increase. But if damaging catastrophes become more of a norm, that could change.
“The insurer needs to price the policy to reflect the risk,” he said. “If they see certain parts of the state are repeatedly getting hit by natural disasters, they may revisit what they charge for coverage there.”