Secondary peril

The 2023 severe convective storm season in central Europe cost close to 8 billion euros of insured damage, more than several years of primary perils. Secondary perils are those natural events that are more frequent and individually less severe than primary perils. Their recurrence, worsened by climate change, drives annual losses that are ever harder to predict. The main ones are severe convective storms (hail, tornadoes, straight-line winds), pluvial and fluvial floods, wildfires, landslides, droughts and heatwaves. The term is relative: a hurricane is the primary peril, and the coastal flooding and landslides it induces are its secondary perils. Swiss Re estimates that between 2012 and 2022 secondary perils accounted for 70% of global insured losses from natural catastrophes. That share reflects both better insurance penetration in areas exposed to wildfire or convective storms (North America, central Europe) and the climatic worsening of these events. Classical catastrophe models, designed for primary perils, struggle with them: frequency is harder to model, spatial distribution is less concentrated, and the non-stationary trend invalidates historical series. Secondary perils are now at the center of reinsurance portfolio reviews. Swiss Re counted 142 insured loss events in 2023, and severe convective storms in the United States alone cost insurers more than 50 billion dollars, a record (sigma 1/2024). These losses, often between 1 and 5 billion dollars per event, stay under the retentions of high-layer excess of loss treaties and fit cat bonds poorly, since those are calibrated for primary perils.