US severe storm losses set new benchmark as insurers turn to advanced modeling

Sarah Johnson ; 2025-12-04 21:50:34

The storms are establishing a "new normal" for extreme weather losses

Catastrophe & Flood

By Josh Recamara

Nov 23, 2025Share

Insured losses from US severe convective storms (SCS) had already reached $42 billion through September 2025, with average per-event costs 31% higher than the previous decade, according to Moody's analysis.

The frequency and intensity of these storms are establishing a "new normal" for extreme weather losses, according to the note.

Severe convective storms are among the most frequent and costly natural catastrophes in the US. Since 2020, SCS losses have outpaced those from hurricanes, prompting insurers to reconsider how they quantify and manage this escalating exposure.

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The leading threat to insurers' balance sheets

Insurance executives view SCS as a top issue for their balance sheets. A summer 2025 survey conducted by reinsurance MGA Demex, among American Property Casualty Insurance Association (APCIA) members, with input from National Association of Mutual Insurance Companies (NAMIC) attendees, ranked SCS highest in potential impact on annual earnings after reinsurance recoveries. Fire (excluding wildfire), hurricanes and tropical storms, wildfire, and flood followed. Eighty-seven per cent (87%) of respondents expressed significant or some concern over future SCS losses, highlighting the ongoing threat to insurers’ financial stability.

The survey found that traditional reinsurance remains insurers' primary risk transfer tool, but many are exploring additional solutions. Sixty-three per cent (63%) of APCIA respondents said they would, or might, purchase aggregate working-layer coverage if available, while 49% of NAMIC respondents were investigating similar options.

Moody’s and other observers noted that high attachment points in reinsurer contracts leave primary insurers exposed to substantial losses from frequent SCS events if relying solely on conventional coverage.

Rising risk factors

Between January and September 2025, the US experienced 39 SCS events, with average insured losses exceeding $1 billion per event. Growth in urban and suburban development – which has increased by 20% since 2000 – amplifies exposure, creating larger “bullseyes” for storm damage. Additional factors such as rising material costs and social inflation further exacerbate claims severity.

According to Moody's, SCS events are highly localized and frequent, and historical data is often inconsistent, making traditional modeling approaches unreliable. Without robust models, insurers have often reduced coverage, limited risk transfer capacity, and raised premiums in exposed regions.

What makes SCS unique - and challenging for insurers

Severe convective storms include a range of weather phenomena such as tornadoes, hailstorms, straight-line winds, and derechos. Unlike hurricanes, which typically impact broad regions with advance warning, SCS events are often highly localized and can develop rapidly, sometimes with little notice. This unpredictability makes it difficult for insurers to model risk and price policies accurately.

The US Midwest and Southeast are particularly prone to SCS activity, but recent years have seen significant events in regions not historically considered high risk. The 2023 and 2024 storm seasons saw record-breaking hail events in Texas and Colorado, as well as destructive tornado outbreaks in the Great Plains and Ohio Valley.

SCS losses are also influenced by the increasing value and density of property in affected areas. As suburban sprawl continues and more high-value assets are concentrated in storm-prone regions, the potential for large, multi-billion-dollar loss events grows. Additionally, the prevalence of older, less resilient building stock in some communities can drive up claims costs when storms strike.

Industry response and outlook

In response to the mounting threat, insurers and reinsurers are investing in advanced analytics, catastrophe modeling, and risk engineering to better understand and manage SCS exposures. Some are also working with policyholders to promote loss mitigation measures, such as impact-resistant roofing and improved building codes.

Despite these efforts, the consensus among industry experts is that SCS will remain a leading source of insured losses in the US for the foreseeable future. As the frequency and severity of these storms continue to rise, insurers will need to adapt their risk management strategies, pricing, and product offerings to maintain resilience and protect policyholders.