#8: What's the Biggest Climate Risk that No One Talks About?

Sometimes a risk is something we've known our whole lives, but its profile changes when it comes with greater frequency and severity.


What’s the largest climate risk, relative to the very little amount we discuss it? Hail.

Hailstorms form suddenly, as tight, dense wallops within larger thunderstorms. We struggle to predict their velocity and scale, and when they strike, insurers have to pay out on just about everything. Hail is a classic climate risk: something we think we understand, and can easily frame and manage — but in fact, it’s not going to occur how we’ve experienced it in the past. We don’t know enough to have confidence, and so the private markets are acting rationally and withdrawing from something they can’t quantify. Revisiting how we think about hail enables us to contemplate risk in different shapes and dimensions.

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Most people can be immediately taken back to the first time hailstones fell from the sky in their childhood — an event of shock, wonder and difference. It wasn’t rain. It wasn’t normal. Hail came when the air felt unusually warm. The look on the faces of people nearby immediately made you realise as a child that hailstorms are a rare and special thing.


Hail is not a frozen raindrop, which is probably how a well-intentioned parent explained it to you as a child.

Hailstones are formed by layers of water attaching and then freezing in a large cloud. A frozen droplet begins to fall from a cloud during a storm, but is pushed back up into the cloud by a strong updraft of wind. When the hailstone is lifted, it hits liquid water droplets. Those droplets then freeze to the hailstone, adding another layer to it. The hailstone eventually falls to Earth when it becomes too heavy to remain in the cloud, or when the updraft stops or slows down.

Hail is hard to model on a computer. This is because simulating the growth from an embryo to a large hailstone requires accurate readings on the concentration of droplets, the strength and duration of the up-draught, and realistic modelling of how the unfrozen cloud water melts and sheds in brief storms. It’s not easy and we don’t do it well — though some people might feel a brief moment of contentment learning this, that some things in the pageantry of nature are still beyond our understanding.

Certain parts of the world receive more hail than others. The Rocky Mountains of Colorado, the Andes in South America and the Himalayas all have conditions that make them hotspots. The approach of the summer monsoon season in India brings severe thunderstorms, often with tornadoes and hail. A particularly deadly hail storm in Moradabad, India, in 1888 killed more than 250 people.


Hail has a few features that make it rather unique for us to think about. A fire, flood or hurricane touches every piece of Earth in a very indelible way: but hail melts and disappears. Why does this matter? If hail hits a city, there are hundreds of reports and data points. If hails hits where people don’t live, this isn’t the case. This creates quality control issues, where we learn a lot about hail events over urban areas, but don’t learn a great deal about hail as a phenomenon.

“Hail is a bit challenging for us to confidently quantify because it is all based on eyewitness reports,” says Robert Jeffrey Trapp, head of the Atmospheric Sciences department at the University of Illinois. “It only gets reported if someone reports it. People are [also] pretty bad at estimating size.”

We know hail is becoming more frequent compared to a few decades ago: the radar data tells us this much. But we don’t know much about its velocity, size, speed, duration: and that makes insurers nervous. Why? Because insurers don’t like offering coverage on things they can’t predict or price correctly.


So we know hail is on the rise. But so are damages from hail. None of the below is rocket science, but it does point to the importance of intuition and joining correlated events together:

  • There are more American homes: Half of all homes in America have been built since 1980, when hail frequency began to rise. More than one third of the homes listed today in the growth corridors of Austin, Raleigh, Houston, and Dallas (all hailstorm markets) were built after 2010.

  • American homes are getting bigger: from about 1,700 square feet (139 square meters) in the early 1980s to 2,500 square feet (232 square meters) in 2015.

  • Bigger homes are getting built closer together: modern development trends place buildings closely together on small lots, so when a hailstorm hits a confined area, it hits many more homes.

  • Hail is expanding the territory in which it lands: Insurance startup Understory has calculated that the rate of expansion in the Continental 48 (U.S.) is equivalent to an area the size of Delaware each and every year.

We can think about hail’s future risk with this simple logic:

The number of people is rising. The amount of developed land, buildings, cars, outdoor technology and equipment is rising. The frequency of hailstorms is rising. The territory where hailstorms land is expanding. The math is simple: there will be more hail damage than insurers have been accustomed to.

Texas was the top state in total hail loss claims from 2017 through 2019; with 637,977 hail loss claims. Colorado is another regular claim state, and Omaha, Nebraska is often the top city in total hail loss claims. It would be wrong however to think this is a Great Plains issue: Florida, Louisiana, Arkansas and New Mexico have areas that all experience in excess of 100 severe hail days each year, according to claim loss data. As we now know, this area of risk creeps out each year.

The global reinsurer Munich Re says there are indications that modern buildings are more susceptible to damage from hail. A particular focus is on solar installations, which are often unable to withstand larger hailstones, and have increasingly become a staple of residential and commercial building rooftops in recent decades. Modern building facades are especially prone to losses in severe hail events because hailstones frequently strike at an oblique angle due to wind action. Consider thin finishes with advanced insulation systems behind them — once hit with abrasive contact, the interior technology can be exposed to wetness and expensive repair needs. In short, the more complex and costly the façade, the higher the individual building loss.

Size matters too. A 0.5 - 2cm hailstone will cause light damage to plants in a crop field. 2 - 4cm hailstones will badly damage fruit and vegetables, and light to severe damage to greenhouses, cars and any paintwork. Events with hailstones larger than 5 cm in diameter are particularly relevant for claims: windows and glass roofs will be destroyed, cars are badly dented, aircraft can be unsafe to fly, and people and pets can be in danger of serious injury or even death if outside.


The real story is simply this: hail is an early example of a situation where, in the delicate balance of science, risk and price, there’s not always enough information to make a market. When you can’t make a market, it’s not safe to invest.

For now this is an off-Broadway story, simply affecting Texas and Great Plains policyholders who find the ‘comprehensive’ coverage option in their car insurance too expensive to continue. But a larger story is coming: not only because the hail risk will grow across the country, but also because it’s a portend of things to come in other climate risk domains — when insurers can’t price, there will be fewer ways to protect.


Owen C. Woolcock

3 Questions I Am Asking Myself This Week

1. A recent investigation found that almost 30% of the credits in a California forest offsets scheme don’t reflect real climate benefits, representing about 30 million tCO₂e and a value of more than $400 million at recent market prices. What makes such a figure so astounding? There was no fraud. The project developers appear to have followed all the rules, but the rules do not assure that offsets represent real emission reductions or removal enhancements. In short: good intention program still need still need rigorous review, and proponents having the courage to admit when mistakes happen so improvement occurs. This will be a long-running obstacle in the climate challenge.

2. White House officials have said the ambitious target to reduce US emissions of planet-heating gases by 50% by 2030 was built on a rigorous analysis that laid out pathways to success. As of today, no one has seen it. Is it a serious goal or a political one?

3. At $7.5 trillion, the combined market cap of Apple, Microsoft, Amazon, and Google is higher than the GDP of every country in the world with the exception of the US and China. Though not a climate question, it has me thinking about the future of concentration, talent, focus and competition: all of which are relevant to the way private market firms develop products and services in the pursuit of decarbonisation.

If You Read Or Listen To One Thing This Week

Discovery Channel footage (2:51 secs) of a hailstorm suddenly striking a beach in Siberia, Russia on a 41C day.