Insurance executives view severe convective storms, or SCS, as the leading threat to their balance sheets, a recent survey showed.
Conducted during summer 2025 by reinsurance MGA Demex among American Property Casualty Insurance Association (APCIA) members, with additional input from National Association of Mutual Insurance Companies (NAMIC) attendees, the survey highlights the financial impact and risk management challenges posed by these storms.
When asked to rank perils by potential impact on annual earnings after reinsurance recoveries, respondents placed SCS at the top, followed by fire (excluding wildfire), hurricanes and tropical storms, wildfire, and flood. Eighty-seven per cent (87%) expressed significant or some concern over future SCS losses, emphasizing the threat to insurers’ financial stability.
The survey found that traditional reinsurance remains insurers’ primary risk transfer tool for SCS losses. However, 63% of APCIA respondents said they would, or might, purchase aggregate working-layer cover if available, while 49% of NAMIC respondents were investigating similar options.
Moody’s and other observers noted that high attachment points in reinsurer contracts leave primary insurers exposed to substantial losses from frequent SCS events if relying solely on traditional coverage.
Jim Botsis, head of the Chicago office for reinsurance broker AcrisureRe, explained that while insurers can buy traditional catastrophe towers for individual losses, the greater concern is how accumulated net losses from multiple SCS events may erode surplus. He emphasized that an effective program requires integrating all reinsurance layers to work together strategically.
Matt Coleman, chief risk officer of Demex, highlighted that severe convective storms continue to hit primary carriers' revenue and balance sheets hard. He observed a reluctance or lack of awareness among insurers regarding available risk transfer options beneath catastrophe treaties that could mitigate accumulated SCS losses. Coleman added that innovative solutions aim to fill this gap and provide additional financial protection.
Survey participants included executives across underwriting, sales, reinsurance, loss control, claims, and actuarial functions, with 20% holding C-suite positions, reflecting a broad industry perspective on the financial and operational challenges posed by SCS events.
