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The Makings of a Disastrous Hail Storm

There have been several big hail losses to the insurance industry over the last several years in fairly predictable locations. In 2016, three separate large loss hail events in the span of 10 days impacted several communities in Texas. The front range of the Rockies, including the Denver area, has had several billon-dollar hail events over the last few years as well. However, perhaps surprisingly, Phoenix holds the record for the costliest hail event, which is clearly in an area one might not expect large hail to occur.

Powerful storms moved through the western and southwestern suburbs of Chicago on May 16th providing a relatively rare occurrence of hail through the Chicago metro region. Hail observations ranged from 1 to 2.75 inches in diameter hitting a high exposure area from the suburbs to downtown.

Last night (May 28th) severe weather that occurred in parts of the PA and NJ  is a perfect example of The Makings of a Disastrous Hail Storm. The report of 4 inch hail in Northumberland County, PA would be only the fifth report of hail that large in PA since 1950. This hail swath could easily occur in Reading or Allentown, PA Large hail also came dangerously close to Newark Int’l Airport near Elizabeth NJ. Think of the insurance loss if this hail swath went over all those open car lots around the airport.

While sizeable hail losses across the Central Plains typically grab media headlines and much of the insurance industry’s attention, it is not uncommon for other metropolitan areas, such as Minneapolis, Chicago, and even large cities on the East Coast, to be at risk for considerable hail events. In fact, if you look at the various state record hail sizes across the Northeast, many are four inches in diameter. A hailstone of this size would rival some of the large hail observed in the Central Plains in any given year.

Property Claims Services (PCS) reports there is also a steady increase in severe thunderstorm insured losses. According to the Insurance Institute for Business & Home Safety (IBHS), hail accounts for nearly 70% of all property damage from severe thunderstorms. One of the major reasons for the increase in insured loss amounts from hail events is that there have been demographic changes over time, with more people now living in hail-prone areas in the Central Plains. The already compact populations in many U.S. cities are becoming denser, with some of the biggest cities continuing to grow.

Another factor that needs to be considered is that, as the population increases, the size of newly constructed homes has been growing with it. A recent report published by the U.S. Census Bureau found that the average new house is getting larger, even as the average size of families in the U.S. shrinks. Over the years, the size of newly constructed homes has increased more than 1,000 square feet, ballooning from an average of 1,660 square feet in 1973 to 2,641 square feet in 2018. This means that rooftop targets are larger and easier to hit, which adds to the overall exposure of this already expensive peril. Despite all of the new construction, many homes are aging and are more likely to have older roofing materials, such as asphalt shingles, that don’t get replaced as often as necessary. The exposure of these outdated materials to extreme cold and heat can make them more vulnerable to falling hailstones, thereby increasing the overall susceptibility to hail loss across the region.

There also seems to be a prolific problem of roofing contractors who chase storms. Following the housing downturn in 2008, contractors have increased the practice of trailing damage after hail storms, which aligns with the general uptick in hail-related claims after that year.

Hail Research
I was lucky to join a group of leading researchers at the National Center for Atmospheric Research (NCAR) for the North American Hail Workshop this past summer. This first-of-its-kind workshop was an opportunity for many industry professionals impacted by hail to learn more about this complex peril that is, currently, not well understood. After all, the more knowledge and facts we can gather as an insurance industry, the better the chances are that we can manage risk and reduce premiums for consumers.

From the workshop, it became clear that the IBHS is doing much of the heavy lifting when it comes to understanding hail impacts to the insurance industry. They have conducted extensive research in the observation of hail over the last few years, including the first-ever 3D scans of hailstones, along with density and kinetic energy measurements – very important components of understanding the potential damage hail can cause to structures. The IBHS is also conducting a roof aging study to better understand the impact that roof age has on the resilience of roofing materials to hail damage, among other perils. The initial results from samples that have been aged five years are expected sometime in 2019.

The workshop also went into great detail on weather forecasting models and their reliability to predict hail events in both the near term (day-to-day weather forecasting) and long term. As with any extreme weather peril, the question of what role climate change is playing was discussed. It’s difficult to answer because researchers still don’t fully understand the process of how hail forms and the factors that contribute to different hail size. There is an imperfect understanding of the microphysics and how storm-scale processes interplay. However, in its simplest form, climate change research suggests that a warmer climate would allow for an increased amount of moisture in the air, which would increase the Convective Available Potential Energy (CAPE). In warmer climates, the Convective Inhibition (CIN) also increases with a warmer atmosphere. A warmer climate allows for the build-up of buoyancy for longer periods of time, and when storms break the Inhibition, they could be more severe and intense than in the current climate. The climate modeling presented at the workshop generally shows that climate change may produce an increase in large hail sizes and frequencies, especially in mid-latitudes. The modeling suggests that there may be a decrease in frequency in the lower latitudes, where there are higher temperatures and moistures.

One thing that is helping the insurance industry is the new dual polarization radar data from the National Weather Service. These new radars are providing more precise information on hail size and location for hail swaths, allowing insurance companies to better estimate expected losses from hail events and to mobilize resources to more effectively serve customers that may be filing claims. Having the ability to plan and respond efficiently and accurately is key to managing losses from such large events. BMS Re US clients have access to historical hail swath events to run “what if” scenarios using Verisk Weather Solutions Respond hail data. Using this data, we have built a historical frequency of hail occurrences across the U.S., providing a view of the highest risk zones for hail that are not subject to the various errors that may appear from human-based storm reports. Below is a look at the Verisk Weather Solutions Respond Hail Swath data converted into a Hail Swath Relativity.

BMS Re US iVision hailswath occurrence frequency which utilizes Verisk Weather Solutions Respond Product.

Parts of this BMS Insight are set to be published in the spring addition of the New York Insurance Association NY Connection Magazine.

Approaching the peak of the severe weather season

This BMS Insight will summarize the status of severe weather across the country so far this year and what can be expected as we move into the peak of the season. Typically, Local Storm Reports for tornadoes peak in the middle of May, which is a bit early in the season compared to Hail and Wind reports. Hail reports tend to reach the maximum level around the beginning of June and wind reports peak toward the end of June. The halfway point of large insured loss events, according to Property Claims Services (PCS), tends to also peak around June 6.
There have already been some notable severe weather outbreaks this year, with the highest tornado count occurring since 2012. What makes this season interesting, however, is that, up until the last few weeks, parts of the East Coast had experienced more tornadoes than states in the Central Plains.

Severe storm reports of tornado occurrences show the majority of tornadoes have been in the southeast, with just as many tornadoes occurring in some East Coast states as in Tornado Alley

In fact, some states like North Carolina and Virginia have recorded just as many tornadoes as Oklahoma. With much of the severe weather focused along the more populated East Coast, which has a higher concentration of exposure, one might expect that insured losses would be running above normal. Although it is still early, the data suggests that insured losses are, surprisingly, running 45% below the 2008 – 2018 mean across 11 PCS events year-to-date, which is what the insurance industry would expect. Although there will likely be some loss development, the 489 tornadoes that have occurred this year have, fortunately, missed large cities, which would have increased the insured loss values. As highlighted in my March 3 Insight, tornadoes have occurred, but primarily across the southeast where there is a large concentration of lower valued properties, such as mobile homes.

With the overall count of tornadoes for the year running right at average, and wind reports running slightly above average, it is interesting to note that reports of hail, which have been grabbing a lot of the insurance industry’s attention over the last few years, are down by a significant 57%. This could contribute to the overall decrease in insured loss for severe weather. I reached out to a few hail researchers to ask what might be driving the lower-than-average hail counts this season. The response was that many storms have been centered across the Southeast, which generally doesn’t experience a lot of occurrences of hail. The storms have had relatively anemic lapse rates and less of a deep-layer sheared environment, both of which are needed for larger hail events. John Allen a Assistant Professor of Meteorology at Central Michigan University made mention that lower hail frequency over the Plains is one of the expectations in El Niño years, currently in place in the South Pacific. There also could be a simple lack of reporting of hail events this year which is puzzling in itself.

Daily reports of severe weather (green) and the Average Annual Trend and daily hail reports from 2005 – 2015.

As the insurance industry is well aware, it only takes one destructive tornado or large hail event to impact a populated area, and some of those destructive events often occur in May and June, such as the infamous Joplin, Missouri tornado and hail event of May 22, 2011. So what does the overall threat look like going forward for the next month and a half? Ian Livingston, an author and contributor for the blog site, U.S. Tornado, recently summarized the number of days through the end of June from 2009-2018 that correlate with the various Storm Prediction Center (SPC) outlook categories.

The plot of daily maximum value from 2009 – 2018 of SPC Convective Outlooks.

The plot Livingston created above demonstrates that in May and June there is a consistent probability of Slight and Marginal risk, which makes sense, given this is the overall peak of the severe weather season. He also looked at the percentage of total days with at least some type of severe weather risk and, in June, an impressive 96% of days have at least a low-level tornado threat somewhere in the country.

The forecast models suggest a decent chance of severe weather on Wednesday in Tornado Alley and the Ohio River Valley on Thursday, which could bring more severe weather into parts of the East Coast on Friday. Regardless, severe weather should push its way into the Northern Plains as summer starts to take hold and the jet stream shifts northward.

I recently reviewed the spatial areas of the SPC convective outlook to create a unique view of Severe Storm Relativity-based conditions that could produce severe weather.  Although the Southeast and parts of the East Coast have had their share of severe weather already this year, the overall climatology and longer term weather forecasts suggests a shift will likely occur into the Central Plains and further into the Upper Midwest as summer progresses.

The climatological risk of SPC Daily Convective Outlooks 2000 – 2017.