The latest Swiss Re sigma report was released this week – the annual review of natural catastrophes and man-made disasters for the year of 2014.
It is already widely known that 2014 was, on a global scale, a relatively quiet year in terms of major insured losses, and the report confirms this. Economic losses are also well below the 10 year average. Further reading also reveals that 2014 now holds the record for the highest annual number of catastrophes in sigma's history.
Hang on a minute! Lower than average insured cost, but the highest number of losses? This seems a bit incongruous, doesn't it?
What the report reveals in a special chapter on severe convective storms is that some of that increased frequency of catastrophes comes from hail, tornado and thunderstorm losses. Seven of the top ten natural catastrophe losses last year were attributable to severe convective storms, and the report also states that the global insured losses from severe convective storms reported in sigma have increased at a rate of 9% per annum in the 15 years from 1990.
Much of this recent activity has occurred in the US; however Europe and Australia are certainly not immune, with some large losses of their own. Fresh in my memory is the AUD 1.1 billion hail loss that occurred in Brisbane in November 2014 – yet another severe convective storm loss, which is placed in the top ten losses for 2014.
Australia is no stranger to large thunder and hail storms. The Sydney hailstorm of April 1999 occurred early in my catastrophe underwriting career. Even before this event, a review of insured loss statistics showed that thunder and hail storms were the most significant insured peril in terms of frequency of moderate to large insured losses. I also vividly recall that, in the days after the 1999 storm, many speculated on the ultimate insured loss. Everyone knew it would be big and some even ventured to suggest that it would be twice as large as the AUD 320m (unindexed) 1990 Sydney hailstorm. The loss finally came in at AUD 1.7 billion, smashing previous records, and in the process it reset everyone's assumptions about how big hail losses could be in Australian cities.
So, I wasn't too surprised when we experienced another large hail loss in November 2014 in Brisbane. We have also experienced two other "billion dollar" hail losses across Australia in the past five years. While we all know that Sydney and Brisbane are capable of generating large hail losses, the billion dollar (each) insured losses from Perth and Melbourne in March 2010 did recalibrate my broader risk view of hail in Australia, as those cities, especially Perth, are not widely considered to have high hail risk. Just to reiterate this point, Melbourne then followed with an AUD 730m storm on Christmas Day 2011. I am now of the view that a billion dollar loss in an Australian capital city should be expected on a regular basis, however, my hail pricing tool suggests that we should see such losses somewhat less frequently than what we have observed in the past five years....
So, I'll put the question out there to start the conversation, or to just get people pondering. Is the severe convective storm loss history in Australia in the past five year's just randomness at play, or is more representative of a new norm?
My gut tells me that Sydney's just about due for a decent hail storm, but I'm happy to be proven wrong by Mother Nature...
Category: Climate/natural disasters: Disaster risk, Floods/storms
Location: Sydney, New South Wales, Australia