In many parts of the world, financial losses from natural catastrophes and severe storm weather have been rising steadily. Damage from high winds, tornadoes and hail accounts for a steadily increasing share of annual insurance losses. The question is why.

Some might put it down to storms becoming more common and more severe. But while those effects are real, there's a lot more to it than that.

US executives now rank severe storm damage and floods as their leading natural disaster concern, ahead of earthquakes, fires and hurricanes. — Gallagher Business Owners' Survey

New analysis from Gallagher Re shows that economic effects, such as inflation in the cost of building materials, may account for as much as 90% of the rise in damage costs. That means there are levers that business leaders can reach for, to build their resilience and limit their losses.

Limiting future losses will depend as much on improving the resilience of our buildings, as it does on advancing our understanding of the climate.

"Climate change is an important part of the risk landscape, but the data tells us that much of the growth in damage costs is being driven by the built environment, where we build, how we build, what materials we use and what it costs to repair them," says Steve Bowen, chief science officer at Gallagher Re. "That means businesses are not powerless. There are practical levers they can pull today to reduce vulnerability, strengthen resilience and limit future losses."

Businesses that invest in risk mitigation and loss control measures can reduce future insurance losses, while strengthening resilience against severe weather events and minimizing potential business interruption.

Counting the cost of storm damage

In years gone by, the insurance industry regarded severe convective storms (SCS) as a "secondary" peril. There might be good years or bad years, but by and large, the financial fallout was more manageable than losses from so-called "peak" perils, such as earthquake and hurricane damage.

That perception changed abruptly in the late 2000s, as losses started to mount dramatically.

In the US, where the data is richest and the records are longest, losses from SCS have risen by a steady 10% a year on average since the 2000s. Annual claims have crept up from below USD5 billion a year in the early 2000s, to around USD45 billion a year as of 2025. 

*Note: loss figures are nominal (i.e. not adjusted for inflation)
Source: Gallagher Re

According to the Gallagher Business Owners' Survey, US executives now rank severe storm damage and floods as their leading natural disaster concern, ahead of earthquakes, fires and hurricanes.

"Traditional catastrophe losses were viewed as hurricane and earthquake, so the likes of Florida and California have been addressing this for years. But now secondary-peril-driven catastrophes are impacting our clients in the Midwest, New Mexico, Colorado and Illinois," observes Martha Bane, executive vice president and managing director of Gallagher's Property practice.

In Europe, losses from SCS have trended from below EUR1 billion a year in the 2000s to EUR7.8 billion, on average, in the 2020s. The APAC region has also seen growing losses from severe storm events in recent years.

Can Weather Alone Explain Rising Losses?

The rise in losses has prompted questions about whether storms are becoming more frequent or severe. Climate attribution studies point to changes in storm behavior and increased damage from hailstorms.1

Nevertheless, long-term meteorological records do not show a decisive increase in the overall number of the most damaging hazards in the US, such as strong tornadoes.

Severe storm activity in the US also varies from year to year, in cycles closely tied to global climate patterns.

The El Niño-La Niña climate cycle, also known as ENSO, has a large influence, with the La Niña conditions that began in 2024 likely to have been a significant factor in the costly SCS years since then.

Mid-June 2026 marked the official transition to El Niño conditions, which in the past has correlated with a less active severe storm season.

However, this climate variability does not explain the step-change in costly storm damage observed since the 2000s. In short, there is no clear evidence that atmospheric changes alone can account for the sustained increase in insured losses.

Economic and social factors drive 80%-90% of insurance loss growth

Instead, the data shows that most loss growth stems from non-hazard-related factors. More specifically, around 80%-90% of the annual growth is attributed to economic, demographic and behavioral drivers, rather than to the storms themselves. 

The mid-2000s were a pivotal moment. In the run-up to the global financial crisis, global crude oil prices spiked, feeding directly into a rise in asphalt material prices — a key input cost for US roofing materials. The costs did not revert back to pre-2008 levels, even after the financial crisis, establishing a higher baseline for repair and replacement expenses.

It is a situation that has been compounded by broader inflationary pressures since then, in the pandemic era and more recently due to geopolitical shocks. The rising cost of materials is currently the leading supply chain risk facing business leaders globally, according to Gallagher research.

At the same time, there has been rapid growth in housing exposure and urbanization. The "expanding bullseye" effect has amplified the damage caused by storms, simply put, there is more expensive property in harm's way.

Between 2000 and 2025, the 20 most loss‑affected US states added more than 14 million new housing units. It means that even modest storms now generate significantly higher losses than in previous decades.

Property owners have also begun putting more valuable items on their roofs. Rooftop solar, battery systems and other technologies are highly vulnerable to hail and wind damage — and have become a significant source of insurance claims, particularly in hail-prone states like Texas and Nebraska.2

The expansion of data centers in storm-affected regions further adds high-value exposure, with added potential for business interruption losses following severe storm damage. "Data centers may be digital on the inside, but their risks are completely physical on the outside," explains Steve Bowen, chief science officer at Gallagher Re. "When a major weather event hits, the real question isn't just damage — it's whether the power, water and cooling systems they depend on can keep functioning." 

These trends are not unique to the US. Italy experienced a historically damaging hail sequence in July 2023 with insured losses stretching above USD5 billion. One reason was the widespread installation of rooftop solar panels, among other cost drivers such as rising house prices.

South Africa, too, has experienced rising costs from hail damage, which now accounts for approximately 45% of motor and property claims over the past decade. The rapid growth of solar installations in the country is introducing new assets at risk.

Gallagher Re has partnered with the insurer AXIS to produce new bespoke hail hazard maps for South Africa, based on NASA data, coupled with a risk-scoring model. The aim is to help project developers demonstrate and develop appropriate mitigation strategies, thus supporting the insurability of renewable power.

Asphalt shingles: Is the popular roofing choice adding to costs?

An important, perhaps underappreciated driver of rising SCS loss costs in the US is the dominance of asphalt shingles in residential roofing construction (as well as for some commercial buildings, particularly those with sloping roofs). Asphalt shingles are inexpensive, widely available and easy to install, making them the roofing choice for most US homes.
Better understanding of exactly how the shingles are impacted by weather — especially in the long-term, can lead to improvements in the product. The Insurance Institute for Business & Home Safety (IBHS) has shown that even smaller-scale hail events can undermine the resilience of these roofs over time.3
The economics of asphalt shingles amplify these effects. Because their input costs are closely tied to petroleum prices, the rise in energy costs since the mid 2000s has directly increased the cost of roof repair and replacement.
Different materials will suit different priorities, premises and local climate conditions. When the time comes to fix the roof, business or premises owners should carefully consider the pros and cons of the options available — and balance long-term resilience against short-term cost.

Rethinking risk through a broader resiliency lens

The rise in SCS losses since the 2000s highlights a fundamental shift in catastrophe risk understanding. Sever weather has become more frequent. But most of the rising cost of insurance claims comes from economic and social inflation.

In 2026, many markets around the world, including the US, are experiencing falling property insurance premiums; one reason is a comparatively lighter toll of natural catastrophes in the past couple of years. That means there is an opportunity to fix the roof while the sun is shining, metaphorically speaking.

“
It's an ideal moment to reinvest any premium savings into risk mitigation, loss control and resiliency efforts.
Martha Bane, executive vice president and managing director, Property practice, Gallagher

"Severe convective storms continue to be a highly impactful peril for carriers and could affect many businesses in the US Midwest and surrounding areas in the future," says Martha Bane, executive vice president and managing director of Gallagher's Property practice. "Insurers tend to approach this area with significant caution."

"This reinforces the importance of being proactive rather than reactive in the current market," she continues. "Short-term premium reductions are fantastic after years of increases but it's important to continue reviewing your property valuations and use this opportunity to address coverage gaps that were removed during the hard market."

"It's also an ideal moment to reinvest any premium savings into risk mitigation, loss control and resiliency efforts," adds Bane. "These actions enhance the resiliency of your assets and help reduce your total cost of risk."

Resilience investment has repeatedly been shown to deliver long-term savings, with every dollar spent on mitigation helping to avoid multiple dollars in future losses.

The findings of the Gallagher research offer important lessons for businesses operating in regions exposed to natural catastrophes. Encouraging more resilient construction, more durable roofing materials and stronger installation practices provides a tangible pathway to reducing vulnerability in the face of extreme weather perils.

For companies that have already suffered severe storm losses, the moment of repair or reconstruction is also an opportunity to Building Back Better: not simply replacing like with like, but investing in upgrades that can reduce future damage, disruption and insurance volatility.

While the business case will vary by asset, location and hazard, resilience investment has repeatedly been shown to deliver long-term savings, with every dollar spent on mitigation helping to avoid multiple dollars in future losses.

Sources

1Gensini, Vittorio A, et al. "Hailstone Size Dichotomy in a Warming Climate," NPJ Climate and Atmospheric Science, 21 Aug 2024.

2"Solar vs. Hail: Pivoting Away from Danger," Axis Capital, accessed 28 Aug 2026.

3Rabb, William. "IBHS Study Shows Smaller Hail May Be More Damaging to Roofs Than Once Believed," Insurance Journal, 2 Oct 2026.