As Storms Grow More Destructive, Property Owners Face Hidden Risks

Severe convective storms (SCSs) – including thunderstorms, hail, tornadoes and straight-line winds – are among the most common and most damaging natural catastrophes in the U.S., according to the Insurance Information Institute. In 2023 alone, insured losses from SCSs exceeded $50 billion, highlighting their escalating impact on businesses and the insurance industry. 

Often arriving with little warning, these storms pose serious risks to both people and property. Structural damage, loss of life and flooding are well-known threats, including stormwater and flash floods in areas not recognized as flood hazard zones by FEMA. But commercial property owners must also consider hidden risks to ensure readiness. 

Shifting Weather Dynamics, Urban Expansion and the Impact on CAT losses

Changing weather patterns have expanded the reach and property damage of SCSs, which are now year-round events. While regions like Tornado Alley, Dixie Alley and Hoosier Alley have long experienced tornado activity, research also indicates a growing concentration of storms further east. Urban expansion exacerbates the property damage caused by storms, with more facilities and warehouses in storm-prone areas. Plano, Texas, for example, has always experienced SCSs, yet its rapid urban expansion places a greater burden on the city’s aging stormwater infrastructure, with more damage occurring from severe weather.   

Because SCSs are driving significant catastrophe (CAT) losses, it’s increasingly important to proactively evaluate necessary updates to physical properties during the underwriting process. For example, when a 15-year-old roof needs replacement, any insurance claims for property damage essentially request the insurer cover the cost of a new roof. However, the property may have been due for a new roof regardless and making that repair earlier could have been less costly. 

Understanding the Risks and Potential Exposures

The growing force of SCSs underscores the need for preparation. Business owners should regularly review their property coverage for gaps, starting with policy exclusions and underinsurance. Standard policies often exclude certain storm-related damages, leaving businesses with unexpected out-of-pocket expenses. Worse, many businesses discover too late that their coverage limits are insufficient, leaving them to face skyrocketing repair costs.

Customized coverage, including excess and blanket insurance and extended replacement endorsements, can help close these gaps – especially for risks policyholders may not realize require additional protection, such as surface flooding.

“Since 1980, there have been 186 recorded severe storms causing at least $1 billion in damage, totaling $455 billion by 2023. Over a third of the storm events have occurred in the past five years.” Cybersecurity & Infrastructure Security Agency (CISA), 2023

Revealing Invisible Threats from Severe Convective Storms

The overt risks of SCSs – catastrophic roof damage, structural devastation and flooding – can overshadow operational disruptions, impacts on employee safety, supply chain issues and substantial financial losses. But each of these is critical to the health of a business.

Business Interruption

Supply Chain: SCSs can severely affect suppliers, logistics hubs and transportation networks, creating shortages and operational delays that impact profitability. These cascading effects often lead to production halts and missed revenue opportunities. 

Employee Safety and Well-Being

Injury Risks: Unsafe work conditions leading to serious injury or fatality (SIF) are often confined to a few individuals during an incident. However, in SCSs, the potential for SIFs to affect the entire onsite workforce is significantly heightened. Also, because SCSs often impact the surrounding community, employees may suffer injuries at home that prevent them from reporting to work. 

“According to the U.S. Bureau of Labor Statistics, about 60 employees die at the workplace each year from weather-related events. Severe weather can cause electrocution, drowning, injuries from falling objects and more.” Texas Department of Insurance

Mental Health: Stress and anxiety triggered by SCSs and their aftermath can severely impact employees’ mental health, thereby affecting organizational productivity and workforce morale.  

Reputational Damage

Customer Perception and Brand Trust: Prolonged disruptions, negative media coverage and customer dissatisfaction can result in loss of business and long-term brand damage.

Taking Cover 

Working with insurance providers, commercial property owners can help protect their assets and businesses by reviewing current property coverage for gaps, including policy exclusions and underinsurance. Business leaders should consider adding specific coverages such as wind and hail coverage, along with flood insurance and extended replacement endorsements. A comprehensive risk management plan encompasses incident and emergency response, crisis management and business continuity planning to ensure swift and coordinated action during storms. 

Being proactive and finding insurance solutions for both apparent and hidden risks of severe convective storms is essential for long-term resilience and success. These measures can help businesses protect not only their property and employees, but also their bottom line.

To learn how CNA’s wide-ranging insurance solutions can help businesses mitigate risk exposures, visit our Commercial Property Insurance page.