With the approach of peak tornado season, it is timely that Risk Management Solutions (RMS) released a report analyzing the impact of the 2008 U.S. severe convective storm season. Last year's season, which included nearly 1,700 tornadoes, was the costliest in the last decade, causing more than $10.5 billion in insured losses. It was also the deadliest in a decade, with more than 125 fatalities.
In the paper, RMS highlights the precipitating factors that lead to active U.S. severe storm seasons. The Newark, Calif.-based catastrophe modeler notes that storms in the severe category include tornadoes, hail, straight-line winds, lightning strikes, and flash flooding. Hail storms account for more than 60 percent of the average annual loss, compared to 25 percent for tornadoes and 15 percent for straight-line winds, primarily because hail storms cover a larger area and occur more frequently and in coordination with tornadoes.
Almost half of last year's total insured losses were caused by five events, which RMS examines in relation to its convective storm model and methodology to offer insight. Although there has not been such a severe season for a number of years, RMS' analysis reveals that a season similar could be right around the corner.
"The degree of early season activity caught many off guard, reeking extreme havoc, amplifying losses, and exhausting many aggregate insurance covers," said Matthew Nielsen, product manager at RMS, in a statement. "While many insurers were surprised, our analysis shows that this level of loss could be expected as frequently as once every four to five years on average. This means there is potential for far more extreme loss seasons, and insurers should quantify and manage their exposures to this peril as they would hurricanes and earthquakes [in order] to help avoid future surprises."
Last year, RMS launched the new RMS U.S. and Canada Severe Convective Storm models to cover broad geographical areas, including the most active regions of severe convective storms globally. These models incorporate numerical simulation output together with weather observation data, such as radar interpretation, damage surveys, and industry claim information.
The entire report is available at www.rms.com.
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