Moody’s plans SCS model launch in 2025 amid rising industry demand

Demand for greater clarity around severe convective storm (SCS) losses is prompting high engagement ahead of the launch of Moody’s new model for the peril next year, according to Mike Steel, general manager of the group’s insurance solutions business.

Steel told The Insurer TV that carriers had shown a high willingness to share data for the new model to ensure its accuracy, reflecting rising concerns across the sector around the cost of the peril.

“In early 2025, we're launching a new high-definition severe convective storm model for the US insurance industry,” Steel said.

“The amount of science and investment that we're putting into that is reflective both of the frequency of losses that we've seen, and also the high level of interest from the industry to really get on top of that risk.”

He added: “What's interesting is the amount of engagement that we're getting from the industry, particularly the claims information that they're providing to us. It's clearly something that the insurance industry needs.”

SCS has been the dominant driver of industry losses in recent years. According to Swiss Re, the peril accounted for 70 percent of the $60bn of insured losses that occurred in the first half of 2024.

A significant portion of SCS-related losses have been retained by primary carriers, particularly following the widespread shift in attachment points at the start of last year.

This has led to severe financial strain for primary carriers with high exposure to the peril, with some forced into insolvency.

MutualAid eXchange, United Home Insurance and Cameron Mutual – all with portfolios concentrated in the Midwest, a high-risk region for SCS – were liquidated in 2023. State regulators identified weather-related losses as a key factor in their collapse.

Steel also noted that the updated model would incorporate data from the 2023 Italian storms, which caused approximately $4.8bn in damages.

"Following the severe convective storms in Europe, particularly the hailstorms in Italy, we've collaborated extensively with Italian insurers to analyse the event data and integrate it into our models. We've also factored in social inflation, which is becoming increasingly relevant," Steel explained.

CrowdStrike a wake-up call for systemic risk in cyber

Steel also commented on the recent CrowdStrike IT outage, which he said highlighted the potential for systemic risk within the emerging cyber insurance market

“A few weeks prior to the event, not many people would have known what CrowdStrike did. Now it’s identified as a key pinch point and a source of systemic risk in the industry,” he explained.

Steel said the industry was fortunate that the outage was caused by coding errors rather than a malicious attack. However, he said it did demonstrate the industry's vulnerability should key infrastructure fall victim to malware.

“We were fortunate that it was a benign update that had a bug in it. I think you see the potential for malware to hit these pinch points and then work through. So it's certainly a wake-up call from that point of view to say there is systemic risk, we need to be on top of it and it's not just the obvious things, like the big cloud providers,” said Steel.

Despite the concerns, Steel pointed out that the event also demonstrated the resilience of the cyber industry.

“It was a small loss to the industry. What it did show, I think, is the resilience of the cyber community in getting on top of the applications developers and so on, and getting on top of those types of things, implementing solutions quickly,” he concluded.

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