Severe storms that swept across the north-central US in mid-August could generate insured losses in the hundreds of millions of dollars, according to Aon.
The events add to growing catastrophe costs that continue to strain property insurance markets in Illinois, Minnesota and South Dakota.
Aon said multiple rounds of storms between August 15 and 19 caused widespread damage, including flooding and wind impacts in Chicago, large hail in South Dakota's Black Hills, and downed trees and powerlines across the Minneapolis-St. Paul metro area. A state of emergency was declared in Lyon County, Minnesota.
The timing comes as Illinois regulators and insurers are already at odds over pricing, according to a Best Wire report. Gov. JB Pritzker (pictured) criticized State Farm's proposed 27.2% homeowners rate hike, calling it "unfair and arbitrary." He urged the Department of Insurance and the General Assembly to take action, the report said.
State Farm, which controls nearly a third of Illinois’ homeowners multiperil market, argued that severe convective storm frequency has climbed, making Illinois the second-highest state for hail-related claims last year. The company said its filings reflect actual catastrophe experience. Pritzker countered that the assumptions do not match the state’s own analysis.
Similar pressures are visible across neighboring states. South Dakota’s market is led by State Farm, American Family, Farmers, Auto-Owners, and Nationwide, which together wrote more than half of the homeowners business in 2024. In Minnesota, State Farm, American Family, Auto-Owners, Farmers, and Liberty Mutual make up the top five carriers, all with significant exposure to August’s storms, according to the report.
Meanwhile, industry analysts noted that the Midwest has become a hotspot for severe convective storm losses, which differ from hurricanes in their frequency and clustering effect. Events can strike multiple states in quick succession, leading to significant aggregate losses. For insurers, this has made pricing adequacy more difficult, with traditional catastrophe models underestimating both frequency and severity trends.
Aon’s estimate noted that non-hurricane weather systems are now producing billion-dollar loss events on a regular basis. The Insurance Information Institute has previously reported that convective storms have overtaken hurricanes as the largest driver of insured natural catastrophe losses in the US in recent years.
While coastal states continue to battle with escalating reinsurance costs tied to hurricanes, the Midwest’s exposure to convective storms is creating a parallel challenge. Regulators across both regions are faced with the similar dilemma on how to keep coverage affordable without undermining insurers’ ability to absorb increasingly volatile catastrophe losses.
