Severe 2022 hail damage in France sets new benchmarks, underscores shift of risk and calls for pricing adjustments

In spring and summer 2022, France was hit by numerous severe convective storms causing unprecedented losses, mainly due to hail damage. Estimates of the French Federation of Insurance, France Assureurs, amount to a total insured hail loss of around EUR 4.8 billion from more than one million claims for the year 2022, with about EUR 3 billion in property loss. This makes 2022 the costliest year by far for France in terms of hail losses, exceeding the previous record year 2014 by a factor of three to four. The industry should consider reflecting this experience in its hail risk assessment.

As highlighted in our sigma study 1/2021, hailstorms are an important secondary peril in Europe, with losses on the rise. Figure 1 is an updated version of the sigma study 1/2021, showing the historical annual insurance losses in Europe at 2022 prices (based on consumer price index). It shows the shift towards substantially higher losses around 2008, so from a loss statistics perspective, we are experiencing a new normal that began about fifteen years ago.

The loss increase is partly explained by macro trends such as economic growth, inflation, urbanisation, and an increase in built-up land area, along with vulnerability changes (e.g., solar panels) and social inflation trends. It is crucial to carefully account for such trends when quantitatively evaluating historical losses. 2022 particularly highlights the need for appropriate de-trending, as it has been a year with high inflation which has impacted repair costs especially.

Climate change could also influence the intensity and frequency of convective storms, although the trends are currently highly uncertain [IPCC, 2021; Raupach et al., 2021]. Environmental conditions conducive to convective storm development are expected to become more likely and recent studies suggest that severe hail likelihood may increase as a result, in parts of Europe [e.g., Rädler et al., 2021]. For the medium term however, socio-economic factors are presumably changing at a faster pace and are the dominating driver of the observed loss trend.

The extremely active 2022 hail season was characterized by very hot conditions and numerous individual loss-causing hailstorms. Most of the total loss can be attributed to storms related to the low-pressure systems Maya (early June) and Qiara (mid/late June). Qiara brought several consecutive days of large hail and was preconditioned by the exceptional June 2022 heatwave across France. Summer heatwaves and stationary weather patterns, also relevant to other perils such as recently observed in the 2021 European floods, are becoming more common in Western Europe due to climate change [IPCC, 2021].

For France, the 2022 annual hail loss exceeds the previously observed range by far and there is large uncertainty in return period estimations. From an event (or loss-occurrence) perspective, the Pentecost storms in 2014 (or Ela) used to be the key industry benchmark. It was the most expensive hail event for France prior to 2022, with a property loss around EUR 600–700 million (adjusted to 2022 values, depending on the method). The market return period of Ela was commonly assumed to be between 20–50 years. This year, both Qiara and Maya exceeded the Ela event loss, which demands a reconsideration of event return-period assumptions in the industry. The event-loss level of EUR 600–700 million (2022 values) has now been exceeded three times in the French market in the last ten years alone (Ela, Maya, Qiara) and can be considered a robust benchmark, even when acknowledging that the two 2022 events may not be independent.

An appropriate observation period needs to be selected carefully in order to establish a representative loss history. Given the rising trend for hail losses in Europe, and the globally observed change in hail loss statistics, the "new normal" should be accounted for and reflected in a reasonable loss experience window.  

By making use of the new data points, it can be estimated that the return period of a EUR 600–700 million property event loss level, is less than ten years for the French market.

In summary, we can conclude that

• Insurance hail losses in France and Europe have dramatically grown and we see a new normal that started around 2008. A meaningful analysis of historical losses requires consideration on the use of corresponding loss experience windows and adequate consideration of macro trends.
• The 2022 annual aggregate hail loss is the highest on record in France, while the return period remains uncertain for the time being. However, the individual events in 2022 provide a robust benchmark for estimating the 2014 Ela event loss return period at below, or even well below, 10 years.
• Insurance risk assessment and pricing for hail requires adjustment to assist in regaining long-term sustainability.

Whilst there was a significant impact to the industry, the 2022 events helped to ascertain that the hail risk in Europe has materially shifted over the past decade. In that sense, 2022 brought more certainty, in terms of what the market should be considering.