Severe convective storms – including derechos, tornadoes, and hailstorms – are increasingly driving massive insured losses across the United States, now exceeding those historically caused by hurricanes [[1]]. A new report from Moody’s indicates that insured losses from these events have reached $42 billion through the first nine months of this year, a 31% jump over the decade average, and prompting a search for more accurate risk assessment tools. the insurance industry, along with investors, is bracing for a potential continuation of this trend as climate change contributes to more frequent and intense weather events [[2]].
Insured losses from severe convective storms (SCS) in the United States reached $42 billion during the first nine months of this year, according to a new report from Moody’s. The average cost per event was 31% higher than the decade average, signaling a potential “new normal” for extreme weather events.
The United States experienced 39 SCS events between January and September, with each event averaging over $1 billion in insured damage. Reinsurers and brokers currently estimate total SCS damage for all of 2024 will reach between $51 and $57 billion. This projection places the total for the first nine months of 2025 on a trajectory comparable to the full-year total of the previous year.
Aon estimates that total global insured losses from SCS events for the first nine months of 2024 reached $57 billion, marking the third-highest total ever recorded for that period. Gallagher Re, a reinsurance broker, assessed the total insured damage from extreme weather in the U.S. during the same timeframe at $61 billion.
Moody’s attributes the increase in damage from extreme weather to several factors, including growing urban exposure, which has increased by 20% in the U.S. since 2000, effectively creating a larger target for storm impacts. Rising commodity costs and social inflation are also contributing to the escalating financial toll.
“As SCS-insured losses have significantly exceeded those from hurricanes since 2020, the insurance industry is seeking ways to better understand, quantify, and manage these increasing risks—including through transparent and detailed solutions like Moody’s North American SCS HD Model, launching in December,” Moody’s stated.
The new model incorporates detailed claim data, high-resolution radar data, and explicit derecho modeling, along with a dynamic roof methodology and post-event loss amplification (PLA) features. Developed in collaboration with the insurance sector, the model aims to provide improved coverage options and ultimately channel more capital into a more stabilized market.
Julie Serakos, Managing Director, Model Product Management at Moody’s, noted: “Modeling severe convective storms—which have averaged over $45 billion in U.S. insured losses over the past five years—has long been challenged by computational complexities and unreliable, highly localized hazard information.” She added, “Moody’s new HD SCS Model breaks down these barriers, offering insurers sharper, more reliable risk insights that will help improve coverage and stabilize markets.”
The increasing frequency and impact of severe convective storms are also reflected in the catastrophe bond sector, with the recent issuance of the first pure SCS catastrophe bond since 2010. This development underscores the growing need for innovative risk transfer solutions as climate patterns shift and extreme weather events become more common.
