Unlike hurricanes, SCS events can strike with little or no warning, unleashing significant localized damage and triggering knock-on effects such as flash flooding. These unpredictable events have emerged as a major annual loss driver for the insurance industry, accounting for nearly half of all insured natural catastrophe losses last year, totaling over US$60bn. Between 2023 and 2025, losses even accumulated to a total in excess of $200bn, according to Gallagher Re. The US is the number one SCS hotspot, accounting for more than 80% of the value of insured losses globally. This trend is reflected in the latest Allianz Risk Barometer where natural catastrophes ranked #5, remaining a consistent presence in the annual business risk ranking.
While tornadoes often dominate the headlines, the most significant SCS losses are caused by hailstorms, which are estimated to account for as much as 50%-80% of all losses. Again, the US is the global hotspot for these events, as well as the top loss location for hail claims, but Allianz Commercial analysis shows many other regions have also suffered substantial hailstorm damages. Building resilience against this peril is therefore not a nice-to-have but needs to be on the agenda of every company with exposed assets in high-risk areas. But addressing this peril requires more than traditional scenario planning. New approaches leveraging AI are able to identify physical vulnerabilities in advance, enabling proactive risk mitigation to build resilience.
Thomas Lillelund, CEO of Allianz Commercial, comments: “Severe convective storms are still often viewed as a ‘secondary peril’, yet their cumulative losses now rival – and at times exceed – those of primary perils like hurricanes. This reality highlights the urgent need for businesses to reassess their risk exposure and strengthen operational resilience through proactive, locally informed measures that limit both physical damage and disruption.”
Losses from severe convective storms fueled by inflation and expanding footprints
SCS exposures have been intensified by population growth and development into hazard-prone areas. Rapid urbanization, aging infrastructure and assets, and building codes out of step with current exposures can all heighten the risk and value of losses. The limited spatial footprint and brief duration of SCS belie their capacity for concentrated destruction, particularly in densely populated regions, making them an increasingly important driver of economic and insured losses. After hail, damaging winds are the second major loss driver, mainly tornadoes and derechos. Severe hailstorms primarily impact buildings – especially roofs – and all kinds of vehicles, which are major drivers of expensive insurance claims. The damage to physical assets from hailstones can be extensive. A baseball-sized hailstone can carry the same kinetic energy as a Major League ‘fastball’, reaching speeds of up to 100mph (160kph) or more. Hail-related losses are not only growing in frequency but also shifting in character. What was once considered routine property damage now increasingly involves high-value assets, from aircraft fleets to solar installations, driving claim severity to levels that demand a fundamentally different response, Allianz Commercial analysis shows.
Inflation has driven up the costs of rebuilding and repairing property, an increase that is compounded by supply chain disruptions such as shortages in skilled labor and materials. A clear example of inflation’s effect can be seen in the case of roof replacements, which are a significant factor in insured losses from SCS. Since the year 2000, the cost of asphalt roof replacements has reportedly surged by 250% in some regions, with costs rising 45% in the last five years alone, according to Willis Re.
Risk mitigation a pressing priority for businesses
Mitigation measures for withstanding SCS with minimal damage will vary depending on the nature of a business’s activities and the local weather systems it is subject to. A data center in Tornado Alley in the central US will need different resilience strategies than an automotive dealership in hail-prone northern Spain. Scenario analysis is essential for assessing risk exposure and building resilience to climate perils. Instead of reacting to losses after a major storm, organizations can now use AI-supported insights to identify weak points in roofs, facades or critical equipment and prioritize upgrades that minimize future damage. This helps organizations understand how different climate futures could affect their assets, operations, and long-term performance. Scenario analysis can also reveal hidden vulnerabilities, identify possible tipping points, and show how risks may change over time. This forward-looking approach strengthens decision-making by allowing organizations to test adaptation options, focus investments, and design strategies that remain effective under multiple future conditions.
“Traditional catastrophe models have long struggled to capture property-specific risk factors, such as roof type and asset value, or the cumulative effects of hazards like hail on building envelopes. As AI becomes embedded in core risk processes, its most meaningful benefit for customers is its ability to support smarter, evidence-based resilience strategies that adapt to changing weather patterns, rather than relying on historical norms. A data and AI-driven risk management approach is the future and will be essential for organizations aiming to thrive in an increasingly volatile climate environment,” explains Michael Bruch, Global Head of Risk Advisory Consulting Services at Allianz Commercial.
Allianz Severe convective storms - Trends, impacts, and pathways to resilience
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