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Severe Weather Halfway Point

As we approach the climatological peak, I want to provide an update on the North American severe weather season and paint a picture of what the rest of the season might yield.

Besides the latest round of severe flooding in the South Central U.S., there has not been a noteworthy severe weather event this year. Likewise, there has not been a PCS Wind and Thunderstorm Event bulletin over a billion dollars yet. 2005 is the last year a severe weather season was without a billion dollar event this late in the season (understanding that the 2015 data is still preliminary, future loss development is likely and three events yet to have estimates issued).

Overall, the loss sum of all PCS Wind and Thunderstorm Event bulletin (10) is still running 41% of what would be normally expected by this time of year. This also equates to the slowest loss start to the severe weather season since 2007.
This overall lack of severe weather also shows up in the Storm Prediction Center severe weather reports for tornadoes, wind and hail, all of which show they are trending below the 10-year average report count.

phailgraph-bigmay28 ptorngraph-big_May28 pWindgraph-big_May28

As you might have seen in the media, the South Central U.S. has seen its fair share of rain, which has now reversed the drought conditions that had persisted in the region since 2011.   Flood damage is excluded under standard  homeowners, renters and business insurance policies. Flood coverage is available as a separate policy from FEMA National Flood Insurance Program and from a few private insurers.  However, with 8.8 million households in Texas and only 600,000 flood insurance policies, which are mostly coastal I suspect,  the flood aspect is largely uninsured event outside auto insurance policies.  As the Insurance Council of Texas told A.M. Best  auto insurance losses alone are likely to exceed the Correction: The actual figure is $250m or greater (not $1bn) , there was an incorrect figure in the A.M. Best article Artemis sourced the data from.


TexasPrecentofNorMay29 TexasRainfallMay29

Highly correlated with this heavy rain for this time of year would be thunderstorm activity, and this region is where the thunderstorm activity has occurred. But like overall PCS losses, Texas is still running below the 10-year loss average for this time of year with total losses running at a similar level seen over the last three years with further loss development to occur with three more PCS events.

We can speculate about why such heavy rains have impacted the south-central states. The heavy rains can be partly attributed to much warmer than normal sea surface temperatures in the Gulf of Mexico and an active southern jet stream flow from the evolving El Niño in the eastern Pacific. El Niño is a state of the El Niño Southern Oscillation, which is essentially a slowly varying oscillation of currents in the equatorial Pacific Ocean that can either direct warm waters towards the eastern Pacific (El Niño), or towards the Western Pacific (La Niña). El Niño conditions are now established, and I would expect El Niño conditions to prevail through the remainder of this summer and into the fall.  This, combined with the warm Gulf of Mexico sea surface temperatures (concern for hurricane season also), means that more wet conditions will likely be in the cards for the Southern Plains – at least through June and possibly into July with the slow drift of  storms and moisture into the Central Plains in July.

BMS Canada Risk Services appoints Shaun Johnston as Chief Operating Officer

Vancouver, Canada – BMS Canada Risk Services (“BMS Canada”) the Canadian arm of the independent specialist insurance and reinsurance broker BMS Group Ltd., today announces the appointment of Shaun Johnston as Chief Operations Officer (COO). He will report to Brian Gomes, CEO of BMS Canada, and will be located in BMS Canada’s Vancouver office.

Shaun joins BMS Canada from Aon plc (Aon) where he spent over a decade in the company’s Construction Services Group based in Vancouver. During his time at Aon, Shaun led a team of 20 specialists and grew a leading broking portfolio, providing risk management services, national and cross-border insurance programme design and management to some of western Canada’s largest and most diversified construction and property development companies.

Brian Gomes, CEO of BMS Canada Risk Services, said: “I am delighted to welcome Shaun who joins us both as COO for BMS in Canada and head of our Vancouver based operations. This is a very exciting time in our strategic expansion as we continue the significant growth of our businesses across Canada. I know, from working with him previously, that Shaun brings to BMS a reputation of being absolutely passionate about client service, working closely with his clients to deliver solutions to their most pressing business needs. He also brings to BMS his leadership in the provision of advisory, programme design and placement services for large complex construction projects having worked on some of western Canada’s largest construction projects over the years. I can not think of a more suited individual to drive growth of BMS Canada’s operations nationally. His leadership, experience and market network will be instrumental in the ongoing development of our position as a market leader.”

Shaun Johnston commented:

“I am very pleased to be joining Brian and the BMS Canada team, who have set a new benchmark for excellence in customer service and innovation in the Canadian market place. I’m greatly looking forward to implementing and leading our strategic expansion as we continue to build BMS’ operational capability across the country.”

50th Anniversary – Insurance Retrospective of May 6, 1965 MSP Tornadoes

50 years ago today, the upper Midwest was devastated by an outbreak of severe weather. A similar storm today would result in what might be one of the largest-ever severe thunderstorm losses to the insurance industry. For four consecutive days in May 1965, severe weather, including 37 significant tornadoes, of which at least nine were major tornadoes, affected much of the central United States. The most devastating part of the outbreak occurred when six tornadoes swept across the western and northern portions of Minneapolis/St. Paul. Of the six tornadoes that swept the seven-county region, four were rated F4, one was rated F3, and the other produced F2 damage.


Shown is a photo of a tornado crossing to the west of the junction of highways 7 and 101 on May 6, 1965 (taken by Minnetonka resident. H. B. Milligan). It is believed that this was the tornado that touched down in Chanhassen at 6:27 p.m. and dissipated in Deephaven at 6:43 pm.

The outbreak was significant in several ways. First, it occurred just three weeks after the historic Palm Sunday tornado outbrea, which no doubt left local residents feeling a heightened sense of alarm about storms. Second, it was the first time in Minneapolis/St. Paul history that civil defense sirens, now used nation-wide, were used to warn people about severe weather. The U.S. Weather Bureau issued quick and successful warnings that were widely communicated by local radio and television stations. These significant new communication methods likely saved many lives, despite the fact that the storms killed 13 and injured 683. Finally, the tornadoes served as yet another example that helped dispel the myth that tornadoes won’t hit a city, a lake or a river.

Historical accounts have focused mostly on the tornadoes during the outbreak because of their remarkable pattern: at a single point in time three tornadoes were on the ground, and two tornadoes hit the same location just hours apart. Some of the hardest-hit cities included Chanhassen, Deephaven, Fridley, Mounds View and the Spring Lake Park suburbs, all of which have undergone tremendous growth since 1965. It is estimated that 600 homes were destroyed during the series of storms, and over a thousand more were damaged. Today, the affected suburbs have expanded from what was farmland 50 years ago, to what is now primarily residential.

The increased number of homes and the increased value of homes in Minneapolis/St. Paul suburbs also increase the potential for catastrophic damage from a similar future event. In some cities, the type of housing exposed to storm perils affects the potential loss severity. Two of the F4 tornadoes touched down in the west suburbs, and these suburbs have seen explosive growth since 1965. For example, one of the 1965 F4 tornadoes reportedly impacted 35 homes on Lotus Lake and 50 homes on Christmas Lake. This area now hosts many multi-million dollar lake homes. Home values in other nearby neighborhoods have grown significantly as well, including multi-million dollar homes that line the expansive shores of Lake Minnetonka. Fridley, Mounds View and Spring Lake Park were impacted by two F4 tornadoes that touched down just hours apart and crossed paths. Those cities may not include as many high-value homes, but the number of residential properties has grown, and now includes not only more residential properties, but high-value commercial properties as well. For example, one of the 1965 tornadoes tracked less than a mile from what is now the Medtronic world headquarters campus.

Despite the loss of life and property damage caused by the May, 1965 storms, it’s important to note that the historical data includes only limited reports of hail and damaging winds. These perils most likely also impacted the area 50 years ago, and arguably, including damage from these lesser-reported perils would increase the financial impact of the storms.

Although there are large uncertainties on exact track, width, and strength of all the tornadoes that occurred 50 years ago across the seven-county metro region, BMS Analytics digitized these historic tracks to create a deterministic scenario in an attempt to understand the potential impact of a similar storm today. The scenario suggests an insurance industry loss between $10 – $14 billion dollars. This is equivalent to a return period of 2,500 – 7,500 years according to various catastrophe models.


BMS Analytics digitized deterministic tornado scenarios with four perturbation to account for track uncertainty

Recently we have seen images of single tornadoes hitting cities like Tuscaloosa, AL; Joplin, MO; and Moore, OK and causing billions of dollars worth of insured damages ($6 Billion in total insured loss). Recalling the events of early May, 1965, is a reminder that several major tornadoes can hit a large metropolitan area such as Minneapolis/St. Paul on the same day. Although unlikely, a similar event would be extremely damaging due to the ongoing population and wealth growth described above. And if such an event occurred, it is likely a similar outbreak would have a large impact on the insurance industry.