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The insurance industry is grappling with a new kind of weather risk that’s increasingly driving its biggest loss category.

While no single weather event caused more than $10 billion in losses for insurers last year, there were 37 thunderstorms that each cost at least $1 billion, according to a report by Aon Plc. That’s more than ever before and way above the average of 14 such storms in a single year, the insurance broker said.

The development is forcing the industry to rethink some of its risk assumptions amid a clear uptick in the number of thunderstorms across Europe and the US. Severe so-called convective storms, which are characterized by heavy rain and intense winds, accounted for , Aon estimates. That’s equivalent to 59% of losses from all natural disasters, according to its report.

“The increase in severe convective storms surprised us,” Michal Lorinc, head of catastrophe insight at Aon, said in an interview. “It means that companies need to evaluate their portfolios, and to look at future scenarios.”

A large chunk of last year’s losses stemmed from “relentless” thunderstorm activity, according to Aon. That includes 25 severe convective storms, of which 21 occurred in the US. All but one of the global billion-dollar events were weather-related, Aon said in its report.

Others in the industry have made similar observations. Recently published research by Swiss Re Institute showed that global thunderstorm losses in 2023 were almost 90% higher than the previous five-year average of $32 billion, and more than double the previous 10-year average of $27 billion.

And earlier this month, Munich Re’s chief climate scientist, Ernst Rauch, said insurers are having to rethink how to classify storms.

“We used to refer to regional thunderstorms as secondary perils because they only cause small or medium-sized damage on their own,” he said in an interview. “But as the number of thunderstorms increases, we have to think about a new classification.”

According to Karen Clark, a pioneer in modeling catastrophe risk, there’s growing market interest in so-called secondary perils. It’s also a development that’s creating opportunities for catastrophe bonds, says Clark, who’s the co-founder of Boston-based Karen Clark & Co.

All told, global insurance losses last year exceeded $100 billion for the fourth year in a row, according to Aon. New Zealand, Italy, Greece, Slovenia and Croatia all recorded their costliest weather-related insurance events on record.

The level of unprotected risk also is considerable. Insurance covered only 31%, or $118 billion of the estimated $380 billion of total losses for the year, according to Aon’s figures.

Extreme weather can undermine corporate physical infrastructure as well as supply chains. It also can threaten the health of workers who toil outdoors for industries such as construction, agriculture and real estate. Last year, 24 countries and territories broke or tied their previous maximum temperature records, according to Aon.

Photograph: Buildings submerged by floodwater following Storm Daniel in the village of Kastro in Trikala, Greece, in September 2023. Photo credit: Konstantinos Tsakalidis/Bloomberg

Related:

• Natural Disaster Protection Gap Returned to ‘Average Levels’ in 2023
• Secondary Perils Drive Global Insured Losses to Estimated $123B in 2023: Gallagher Re
• Insured Price Tag for Natural Disasters Was $95B in 2023 With Economic Cost of $250B
• Global Insured Losses From Severe Convective Storms Hit New High of $60B: Swiss Re

Topics Trends Carriers Windstorm