Navigating the Impacts of Severe Convective Storms

Property & Casualty

Navigating the Impacts of Severe Convective Storms

In recent years, Severe Convective Storms (SCS) have garnered increased attention in insurance policy negotiations. These storms, which encompass a range of weather phenomena such as lightning, straight-line winds, tornadoes and hail, have become a focal point for insurers due to a surge in incurred losses.

Historically considered a “secondary” peril, SCS was not subject to the same scrutiny as other “traditional” natural catastrophe exposures, such as named storms, floods and earthquakes. However, the frequency and magnitude of losses associated with SCS have been steadily rising, pushing them into the spotlight.  

 One of the factors contributing to the escalating impact of SCS is the growing number of major natural disasters overall. Insurers are beginning to recognize the potential severity of SCS, leading them to reassess their policies and underwriting strategies accordingly.

Renewable Energy Impacts

This heightened risk poses particular challenges for renewable energy projects, including solar installations. These projects are typically built on slim profit margins, making it difficult to absorb increasing insurance prices and higher deductibles. Moreover, third-party lender requirements and agreements can further complicate matters, potentially hindering the viability of renewable energy ventures. 

Insurance providers and panel manufacturers are working collaboratively to devise solutions to mitigate hail impacts on solar projects. These solutions include using different panel materials, configuring panels in specific ways, employing automatic warning systems and tilting panels away from anticipated storm paths. However, despite these efforts, the losses continue to mount, indicating the need to explore additional solutions for more effective outcomes. 

Population Sprawl & Construction

Population growth and construction in previously undeveloped land are additional factors contributing to the impact of SCS. As people expand into previously inaccessible areas, they often encounter weather patterns that were not adequately modeled or understood due to limited historical data. With the potential of lower land prices in remote areas, construction has proceeded without knowledge of the potential risks. As a result, properties and projects can be exposed to higher levels of vulnerability. 

SCS Across Industries

While SCS has notably impacted renewal energy sectors and construction in new areas, it can affect businesses across industries.  

Addressing the impact of SCS requires innovative solutions, better risk modeling, and collaborative efforts among insurers, manufacturers and project developers to help safeguard properties and businesses against future severe weather events.  

If you have questions about how SCS may be addressed in your current policies, please contact us to receive a policy review. 

Property & Casualty Team