LONDON, 23 September 2024 - Aon plc (NYSE: AON), a leading global professional services firm, today announced the launch of its latest catastrophe model to analyse the impact of Severe Convective Storms (SCS) in the United States – a peril that has become increasingly costly for re/insurers, having accounted for more than 60 percent of global natural catastrophe losses in the first half of the year.
Developed by Aon’s Impact Forecasting team, the model reflects re/insurers’ true exposures to the peril, capturing the full spectrum of event severities, spanning higher frequency $1B to $5B industry loss events, smaller events that do not appear in the historical record, and realistic tail losses from derechos and other significant SCS hazards. Also available is a complete 20-year historical event set, allowing companies to validate modeled industry losses, analyze historical events based on their current portfolios for better reinsurance decision making and compare modeled historical losses to claims experience for a more informed view of risk.
This enhanced model blends updated observational data sets with the latest natural hazard science to produce a comprehensive view of SCS risk. Further features include:
- Alignment with recent historical loss experience across both industry and client portfolios.
- Average annual loss and low return period aggregate loss estimates that more accurately represent trended client experience.
- Full capture of all SCS sub-perils and appropriate geographic distribution in modeling to allow for a more accurate view of tail-risk.
- A ‘ground-up’ component-based vulnerability framework that explicitly accounts for the cost, resistance and potential damage to different parts of the structure.
- Open, transparent, and customizable loss modeling platform with vulnerability curves that can be refined to best reflect clients’ unique claims experience and loss histories for a custom view of risk.
Adam Podlaha, CEO of Impact Forecasting, said: “The industry has faced many challenges when attempting to model severe convective storms, especially in terms of producing accurate average annual loss estimates. By using our SCS model, re/insurers will be presented with a more in-depth view of the risks associated with hail, thunderstorm-produced winds and tornadoes, which in turn will help to shape better strategic decisions around portfolio management for this very costly peril.”
Severe convective storm losses have consistently increased in recent decades. According to Aon’s 2024 Climate and Catastrophe Insight report, U.S. SCS insured losses in 2023 alone were more than $58 billion, while the global impact reached an unprecedented level of $70 billion of insured loss.
Aon research has identified that 80+% of SCS loss increases are explained by exposure growth. The firm’s data show that from 1990 to 2022, U.S. SCS exposures (accounting for Real Gross Domestic Product, Fixed Reproducible Tangible Wealth, property cost inflation and population distribution) increased at a combined rate of 8.6 percent per year, while SCS insured losses increased at an annual rate of 8.9 percent.
Eric Robinson, global SCS model development lead for Impact Forecasting, added: “Another historic year for SCS-related losses again highlights the need for an improved understanding of SCS loss drivers. Improved portfolio management is crucial to helping insurers mitigate growing SCS-related losses, and this can be achieved through modeling solutions that are driven by the latest and ongoing research in atmospheric sciences that helps insurers to obtain additional, valuable insight into evolving SCS risk.”
Aon’s outlook for 2H 2024 is marked by heightened expectations of a costly hurricane season, as well as continuing SCS activity in the U.S. and Europe. For further information on SCS and the outlook for the January 1st, 2025, reinsurance renewals, please see Aon’s Ultimate Guide to the Reinsurance Renewal, available at https://aon.io/3Psc8K6.
For more information about Aon’s Reinsurance Solutions, please visit: https://www.aon.com/home/solutions/reinsurance.html.
About Aon
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