Karen Clark & Co has released an updated model for severe convective storms, a weather peril that has become an increasingly important source of losses for Bermuda reinsurers and the insurance-linked securities market.

The Boston-based catastrophe modelling firm said Version 5.0 of its United States Severe Convective Storm Model includes refinements for severe tornado outbreaks and tornado and wind intensity along the Southeast coast.

It also updates assumptions for hail damage to homes, including the age of a building and its roof, and lets insurers enter their own roof-replacement values when modelling actual-cash-value roof policies.

Severe convective storms include hail, tornadoes and straight-line winds. Although they are sometimes described as secondary perils compared with US hurricanes and earthquakes, they have become a major source of insured losses for insurers and reinsurers.

The Royal Gazette reported in March that severe convective storms featured in about one-quarter of catastrophe bond issuance since 2017. Cat bonds are commonly structured through Bermuda special-purpose insurers.

An Acrisure Re report cited at the time put global insured losses from severe convective storms at almost $200 billion from 2020 to 2024, about 2½ times the total of the preceding five years.

Karen Clark, KCC’s chief executive, said the model update was about the speed at which the science, weather data and use of artificial intelligence were developing.

“The world is getting more complex, the climate is changing, and we’re learning faster than ever with AI,” she said. “If models —particularly for the frequency perils — are even a few years old, they’re already out of date.”

KCC said its model uses high-resolution atmospheric modelling to estimate losses from hail, tornadoes and damaging winds, rather than relying mainly on historical storm reports.

The company said the refinements would be most relevant to estimating the effect of tornado outbreaks on large commercial and industrial properties, including hyperscale data centres.

The update also addresses roof actual-cash-value endorsements, under which roof damage is settled on a depreciated basis rather than the full cost of replacement. KCC said such endorsements could significantly reduce hail-loss estimates.

Bermuda reinsurers have direct exposure to the risk through US property catastrophe business. RenaissanceRe, one of the island’s largest reinsurance groups, identified a series of severe convective storms in the southern and Midwest US among its major loss events in 2024.

KCC has previously warned that models designed mostly for hurricane risk should not be used for severe convective storms. In August, the company said its SCS model processes more than 30 gigabytes of satellite, radar and weather data daily to generate estimates of hail, tornado and wind impacts.

Ms Clark said the updated model gives reinsurers and ILS investors more confidence when pricing and deploying capital against the peril.

“The KCC SCS model has become the gold standard for the industry — providing the accuracy and stability that reinsurers and ILS investors require to confidently price and deploy capacity for this peril,” she said.