First, the focus was on hurricanes. Now, their sneakier cousins are lashing the nation with rain, hail and tornadoes at a record-breaking pace that's convincing some insurers the rising risk is permanent.
Thunderstorms caused record losses in the past three years by punishing Americans with $13 billion in damage annually, almost $10 billion of which was insured each year. That's higher than the cost of many hurricanes and approaches the damage inflicted on 9/11, priced at $18 billion to insurance companies.
Now, 2011 storms are threatening to extend that streak. Tornadoes killed more than 300 people in four days last month, spawning between $3.5 billion and $6 billion in insured losses in Alabama and other Southern states, estimates Risk Management Solutions.
"So you have seen a dramatic increase in the amount of hailstorms, golf balls, football-sized hail, straight-line winds at 80 miles an hour, 120 tornadoes. It's just you see a lot more severe weather," Thomas Wilson, chairman and CEO of Allstate Insurance Co., told Wall Street analysts in a conference call last month.
The heightening ferocity of thunderstorms parallels a 15-year stretch of more intense and frequent hurricanes, prompting financial risk to skyrocket in Florida and other coastal states with public insurance programs.
But landfall hurricanes have hibernated for the past two years. That absence has helped focus a clearer, if grim, light on thunderstorms: U.S. damage in each of those years is the highest ever without a hurricane. The number of all natural disasters in 2010 also set a new record, at 247 events, according to the Insurance Information Institute.
That broke a record set the year before when, in 2009, there were just over 200 natural disasters. Most of the disasters in both years were thunderstorms. For comparison, the number of natural catastrophes in 1980 was about 60. Thunderstorms accounted for almost all of them.
While the financial impacts of the numbers are clear, what's causing them is not. Scientists agree that climate change will increase the number of downpours, while reducing light rainstorms. That can mean more floods and drier conditions between rainfalls. Many also believe that the number of intense hurricanes could increase.
'Rapid' move to clean energy sought
But the insurance industry is divided about the impacts of climate change on financial losses. European reinsurers openly warn their customers about the effects of man-made emissions, while some American companies tend to be more cautious about identifying causality.
The chairman of Munich Re, Nikolaus von Bomhard, told shareholders in a letter last month that the company is pressing for "a more rapid transition" to renewable energy around the world by underwriting those projects.
"We are thus also contributing significantly in our core business to curbing climate change and at the same time creating value for the Company and for you as shareholders," he wrote.
Swiss Re is another climate leader. But opinions are often different in the United States, where some industry trade groups and state regulators last year argued successfully against requiring companies to disclose the efforts they're taking against financial risks from climate change.
Climate scientists, also, are careful about assigning blame to climate change for specific floods, wildfires and storms. The climate, after all, contains the average statistics of weather over a period of decades, says Katharine Hayhoe, a climate scientist at Texas Tech University.
"And over the past 10, 20 and 30 years -- 50 and even 100 years -- we have seen those average statistics of weather changing," she told reporters on a conference call this week. "It's not just getting warmer. It's also affecting the frequency and intensity of our precipitation, both snow and rain around the country."
Insurers bid adieu to the 'good old days'
Insurers also see it. But they are looking through a different lens. They focus on the destruction caused by weather events in specific ZIP codes. Some of that might be climatic, but it can also be influenced by increased development, shifting populations and the strength of buildings.
"We don't totally understand the way things happen like they do," said Robert Hartwig, president of the Insurance Information Institute. "We don't have perfect information about the vagaries and volatilities of weather, or why there have so many earthquakes in other parts of the world recently. But we do have to reflect that in the rate. So we do."
He expects homeowners insurance premiums to rise next year because of a 25-year rise in violent thunderstorms. And while hurricanes remain one of the biggest challenges to insurers, convective storms on the Midwestern plains, and everywhere else, are gaining attention, Hartwig says.
"There will be no loss of focus on the hurricanes," he said. "I think what there is, is an increase of focus on [thunderstorms]."
Allstate, the largest publicly traded insurer in the United States, has reduced its exposure in hurricane-prone areas and stopped writing new homeowners policies in California altogether, because of earthquake risk. It has also trimmed back its risk from inland storms.
Those efforts indicate that Allstate is saying goodbye to the "good old days," as its chief put it, when thunderstorms -- called "non-model catastrophes" in industry jargon -- were less violent.
"The assumption underlying some people's view is that this is an anomaly in severe weather, and that we'll go back to the good old days when non-model cats [catastrophes] were in the $500 million range, not the $2 billion range," Wilson said last month.
"We're not running our business that way. We're running our business as if this change ... is permanent," he said. "We don't know whether the genesis of that increase over the last three years is just a cyclical movement in weather, whether we're to 'normal' or we were at 'normal' before, or it's global warming or anything else, but we're acting as if this will be permanent and we need to recover those costs."