The Risks of Hazard

AM Best has published their annual look at World Catastrophes for 2015 (mind the subscription wall). The main three overall takeaways from 2015 are:

1. The largest cat loss of the year was man-made. The explosion in Tanjian, China, caused more insured losses than any natural catastrophe last year, and was the third costliest man-made disaster for insurers in history.
2. Overall, it was another quiet year for cat losses. See Graphic 1 for an historical look.
3. The Protection Gap was huge enormous gigantic, especially in Asia. See Graphic 2 for the gap between total and insured losses. Light green = Gap.

Last week, Cyrena Arnold, the Director of Product Sciences at Weather Analytics, and I blogged about hail, exploring available analytics with the March storm in the Fort Worth area. The response has been incredible to that blog, so a reprise is in order. Revisiting the topic seven days later might seem like a stretch, but there is plenty to discuss from those seven days.

Texas had a really bad March, with the big carriers posting results impacted by the March storms: Allstate, Travelers, and Progressive led the way. Then, April happened, including the April 12th storm in San Antonio that is shaping up as the costliest in Texas history – expecting over $1.3B in insured losses.

This is a joint post by Ivan Maddox and Cyrena Arnold, Director of Product Sciences at Weather Analytics.

Hail. For property underwriters, hail is the peril that probably frightens them most. It is rarely excluded from homeowner policies, it is highly damaging, and very common in certain areas. Hail caused $6.6B in claims in the US in 2014 (AM Best), and there are hardly any decent underwriting tools to help out with it. In case a reminder was needed, here is AM Best’s coverage of Progressive’s Q1 results:

Net income dropped 13% at Progressive Corp. in the first quarter as catastrophe losses increased to $102 million, compared with $9 million a year earlier. Eighty percent of those losses came in March, when wind and hailstorms pummeled Texas and Louisiana.

Two hailstorms in the Dallas-Fort Worth metroplex caused insured losses industrywide of about $1.3 billion. A third storm in the region on April 11, with reports of softball-size hail and strong winds, may have been even more damaging (Best’s News Service, April 12, 2016).

I live in Denver, therefore hail is the natural peril that is most familiar to me. The Front Range urban area (extending from Colorado Springs in the south, through Denver and Boulder, up to Fort Collins in the North) is known in some insurance circles as “Hail Alley.” But just because hail is frequent and familiar here doesn’t mean it’s predictable — on the contrary, it’s always full of surprises!