A new layer of protection against a complex, costly threat

In April, a fierce hailstorm took many residents of Japan's Hyogo prefecture off guard, producing tens of thousands of insurance claims. Two months later, vineyards in France's Beaujolais region were left in tatters by a similar event. And in August, a hail-laden supercell thunderstorm ripped through Alberta, Canada, shattering windows, tearing off siding and damaging roofs.

These events represent a growing challenge for insurers: severe convective storms (SCS), particularly hail, have been driving insured natural catastrophe losses, damaging vehicles, crops, buildings, and renewable energy infrastructure. The Swiss Re Institute has estimated that in 2023 and the first half of 2024, SCS hazards caused a USD 106 billion hit to insurers globally, surpassing losses from hurricanes and earthquakes over this period.

To address this challenge, Swiss Re has enhanced its proprietary CatNet® risk assessment platform with an updated hail hazard layer, empowering insurers and corporate clients to better manage this evolving and costly threat that over the past decade has been responsible for 50% to 80% of global secondary peril losses.

Severe convective storms, which also include high winds and heavy rain, are complex, making them difficult to predict, and insurers often underestimate cumulative losses from frequent events. Historically, this has been complicated by incomplete and outdated data for hail risk modeling, preventing insurers from fully understanding exposures within their portfolios.

Swiss Re's enhancements to CatNet®'s hail layer help to fill these gaps by quantifying hazard from hail, offering a multi-faceted view including current climate and historical perspectives for the past 30 and 60 years to determine hail frequency trends. In practical terms, this means insurers can better understand where hail is likely to strike and the assets in harm's way, helping them manage and price risks more accurately.

As scientists continue to explore the impacts of a warming planet on severe convective storms, we know that a warmer atmosphere can lead to greater instability, potentially altering thunderstorm behavior. With this latest update, Swiss Re equipped CatNet® with a fresh layer of data that displays hail day frequency reflecting the present-day climate conditions.

However, we also know that climate change is not the primary force behind recent, rising hail-related losses. The major drivers are urbanisation, the accumulation of valuable, vulnerable assets in hail-prone areas, and inflation. As economies grow, so do the risks – not just in a single region, but globally.

In the United States, for instance, insured losses from severe convective storms have been rising at an 8% annual rate since 2008. In 2022, severe thunderstorms in France led to more than USD 5 billion in insured hail losses from more than one million claims. Summer hailstorms in Italy in 2023 caused nearly USD 6 billion in insured losses, a new record. Countries in Asia, Africa, and South America also face significant damage from hail.

These costly events highlight the urgent need for insurers and reinsurers to work together with clients to accurately assess assets at risk and develop a clearer global picture of potential hail losses, to prevent them from creeping higher after storms. Recent experience suggests the industry has work to do on this front.

The right tools can help. With CatNet®, US users can also get access to critical exposure information. This includes roof cover, roof condition, roof shape and exterior wall materials. Its intuitive map view and workflows also allow insurers to quickly access hail hazard insights to streamline their risk assessment for portfolios that contain risks in single or multiple locations. Combined with this information, the hail layer update provides an even more comprehensive view of risk.

Thus equipped, insurers can better understand their own risks to improve rule-based underwriting and make pricing adjustments. Robust hail risk data can also inform their eligibility guidelines, leading to more accurate risk selection and management.

And for insurance customers with valuable assets to protect, data-driven insights available via CatNet® can guide efforts to strengthen their defenses, like using impact-resistant building materials made to weather extreme events. Policymakers, too, can play a role by modifying building standards to ensure that future infrastructure has a fighting chance of surviving severe weather perils, regardless of their origins.

For our hail layer update, Swiss Re’s natural catastrophe experts partnered with scientists from Switzerland's Federal Institute of Technology (ETH) and the US National Science Foundation's National Center for Atmospheric Research (NCAR) to create globally validated hail predictions. Our methodology is currently under review for publication in a scientific journal.

While hail from severe thunderstorms may not capture headlines like wildfires or earthquakes, it can cause equally costly destruction. For insurers and their clients, data-driven tools like CatNet® - built on decades of experience and updated to reflect the changing face of 21st-century hazards and exposures - are key to building resilience against this evolving global peril.