A recent report from Allianz highlights that the frequency and intensity of severe convective storm (SCS) events has increased significantly, resulting in billions of dollars in insured losses globally, but these risks can be mitigated through a combination of traditional resilience measures and artificial intelligence (AI) solutions.
Last year alone, these unpredictable events accounted for nearly half of all insured natural catastrophe losses, totaling more than $60 billion. According to Gallagher Re, total losses will even exceed US$200 billion between 2023 and 2025.
The United States is the main hotspot for SCS, accounting for more than 80% of global insured loss value. This trend is consistent with natural disasters consistently ranking fifth in the Allianz Risk Barometer.
The Allianz report states that hail is the most important factor causing SCS losses, accounting for an estimated 50% to 80% of all claims.
While the United States is the global leader in hail-related claims, Allianz Business analysis shows that many other regions also experienced significant hail damage.
“Building resilience against this hazard is therefore not optional and needs to be on the agenda of every company with exposed assets in high-risk areas. But addressing this hazard requires more than traditional scenario planning. New methods leveraging artificial intelligence can identify physical vulnerabilities in advance, enabling proactive risk mitigation to build resilience
Allianz said companies with exposed assets in high-risk areas must therefore prioritize building resilience against this danger. Traditional scenario planning is not enough; new AI methods can proactively identify physical vulnerabilities for effective risk mitigation.
Thomas Lillelund, CEO of Allianz Commercial, commented: “Severe convective storms are still often viewed as ‘minor hazards’, but their cumulative losses now rival and sometimes exceed those caused by major hazards such as hurricanes.”
“This reality highlights the urgent need for businesses to reassess their risk exposures and build operational resilience through proactive, locally informed measures to limit physical damage and disruption.”
Population growth and development in disaster-prone areas have exacerbated exposure to South China Sea risks, and rapid urbanization, aging infrastructure and assets, and inadequate building codes may increase the risk and value of loss.
Despite their limited spatial coverage and short duration, SCS hazards, especially in densely populated areas, are a major source of economic and insured losses.
Allianz Business Analysis says damage to aircraft, buildings, manufacturing plants and renewable energy generation, including solar panels, is one of the most expensive causes of hail claims.
Inflation increases in repair and reconstruction costs, as well as supply chain disruptions such as labor and material shortages, also increase the severity of claims.
Mitigation strategies to protect against SCS with minimal damage will vary depending on the nature of a business’s activities and the local weather systems to which they are exposed, Allianz said.
Scenario analysis is key to assessing climate risks and building resilience. Allianz analysts suggest that organizations can now use AI-powered insights to identify vulnerabilities in assets such as roofs, facades and equipment, prioritizing upgrades to minimize future damage rather than reacting to damage after a major storm.
This helps organizations understand how various climates will impact assets, operations and performance in the future, revealing hidden vulnerabilities and tipping points.
This forward-looking approach enhances decision-making capabilities, allowing companies to test adaptability, focus investments, and design strategies that are effective under a variety of future conditions.
“Traditional catastrophe models have long struggled to capture property-specific risk factors, such as roof type and asset value, or the cumulative impact of hazards such as hail on the building envelope,” explains Michael Bruch, global head of advisory services at Allianz Business Risk Advisors.
Adding: “With AI embedded into core risk processes, its most meaningful benefit to clients is the ability to support smarter, evidence-based resilience strategies that adapt to changing weather patterns, rather than relying on historical norms. Data- and AI-driven approaches to risk management are the future and critical for organizations looking to thrive in an increasingly unstable climate environment.”
