U.S. Thunderstorm Losses Echo Across Industry

Thunderstorms have become a major factor for insurers in the U.S. and industry professionals expect losses to increase even though storm activity remains normal.

In the first half of 2009 insurers lost $6.1 billion to severe thunderstorms out of estimated total loss of $8.9 billion, according to Carl Hedde, Head of Risk Accumulation for Munich Reinsurance America.

Hedde made his comments during a webinar yesterday sponsored by Munich Re and the Insurance Information Institute (III).

While 2009 has not yet matched last year’s record levels of losses, Hedde said that the first half of the year the ranks as the fifth highest loss in terms of thunderstorms since 1980 in the U.S.

Despite the huge numbers, Hedde explained that actual storm activity has remained constant over the past several years and that the losses are attributable to storm location and insured exposure.

“The losses are tied to where the events are actually happening and the amount of exposure being impacted,” Hedde said. “We have also seen an increase in value and exposure.”

According to catastrophe modeling firm AIR, several states such as Georgia, Tennessee, Texas and Arkansas incur significant losses from thunderstorm activity. In fact, AIR points out that severe thunderstorm risk in Texas follows only California earthquake and Florida hurricane in terms of catastrophe loss potential.

Robert Hartwig, president of the III, explained research conducted on behalf of the New York-based industry trade organization showed that the lightening portion of the storms in a major contributor to losses.

“Homes and businesses are absolutely loaded with electronics,” said Hartwig, president “That part of the loss is growing very rapidly.”

The cost of homeowners claims for damage due to lightning strikes has increased 13 percent from 2007 to 2008 and nearly 45 percent from 2004 to 2008, according to the III.

“We’ve seen a very marked increased in losses due to the lightening component,” Hartwig added “Last year the lightening losses alone exceeded a billion for the first time ever.”

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