The Chicago Anomaly

Transcript:

Jon Schneyer: If you have 123 Main Street and 125 Main Street right next door on the same street, if 125 Main Street was built in the last five years or the roof was replaced in the last five years, but over at 123 Main Street, they haven't touched the roof in 20 years, well, one's going to have a severe hail risk—older roof, older home—one's going to have little to no hail risk—newer roof, newer home. So we look at all of that when we tally up the totals that we presented in the risk report.

Maiclaire Bolton Smith: Welcome to Beyond the Buildings by Cotality. I am your host, Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in the property industry. On this podcast, we satisfy our collective curiosity, explore questions from every angle, and look beyond the obvious. With every conversation, we illuminate what is possible.

Hail is often associated with Texas, and rightly so. Severe convective storms hit the state with particular ferocity. Headlines across major metro areas of Dallas-Fort Worth, San Antonio, Austin, and Houston routinely report record-breaking hail damage. But Cotality data found that 2025 was a curveball year. Last year, Greater Chicago unseated Dallas-Fort Worth as the metro area with the most risk of hail.

But why? To talk about this shift in hail losses, we have Director of Research and Content, Jon Schneyer, back on the show today. Jon, welcome back to Beyond the Buildings.

Jon Schneyer: Thank you so much for having me. It's great to be back.

Allie Barefoot: Before we get too far into this episode, here's a friendly reminder about how to see what's coming next in the property market. To make it easy, we curate the latest insight and analysis for you online. Find us using the handle @Cotality on all of our social media channels. But now, let's get back to the show.

All right, well, let's just dive in. So this is exciting news. What happened last year and why did Chicago unseat the Dallas-Fort Worth metro area with the largest potential—I guess was it the largest risk or the largest losses due to hail?

Jon Schneyer: It's the largest concentration of risk. And when we think of concentrations of risk, we're looking at three factors. There is the hail itself—how frequently it occurs, how strong the hail intensity is, how big the hail is, right? How much damage it can occur—that's one aspect. The other aspect is exposure. There has to be stuff on the ground to be damaged for there to be risk. And the final component of that is vulnerability. The stuff on the ground has to be susceptible to hail damage, or if we're talking about other perils, wind or water or fire. But if it's not susceptible, then there's no risk.

Yeah, we recently released our 2026 Severe Convective Storm Risk Report, where we found that because of those three factors, there is a greater concentration of hail risk in the Chicago metro area, unseating the Dallas-Fort Worth area.

Maiclaire Bolton Smith: Now, does that have something to do specifically with the property values or the reconstruction cost values being more concentrated in the Chicago area than the Dallas-Fort Worth area?

Jon Schneyer: Yeah, concentration of a lot of very high-value, sometimes particularly vulnerable structures. Now, in Dallas-Fort Worth, there's still plenty of stuff there, but it's a bit more spread out, right? In Texas, they have a little bit more room to spread their arms. It's one of the key things, you know, key reasons people want to move to the South or the Southeast—a bit more room to kind of spread your wings. Not in Chicago. Big, dense concentration of some very old, very beautiful buildings, but that concentration in an area that is exposed to hail, concentration that might be particularly vulnerable to hailstones falling, means that there's a big concentration of risk in the Chicago metro area. So it's a lot of stuff, a lot of expensive stuff, and some vulnerable stuff.

Maiclaire Bolton Smith: Yeah, I guess when people think of Chicago, they don't think of it as the Haily City, they think of it as the Windy City. So, but now we're looking at a combination of the two. And so how does that impact both homeowners and insurers?

Jon Schneyer: You're right. It is the Windy City for a reason, because it is awfully windy there. But when we look at the perils within a severe convective storm—your severe weather—that are driving insured losses, the dominator is hail. Now, that doesn't mean that the other perils—straight-line winds, things like your derechoes, or tornadoes—aren't loss drivers. But the reason we focused on the Chicago and the Chicago anomaly in this report is that because hail is such a large driver of insured loss and that concentration is so high in Chicago, it makes for a big deal.

Now, that being said, if a tornado were to rip through the Greater Chicago area, the downtown Chicago area, yeah, that would be one substantial, one industry-shifting loss. The thing about tornadoes compared to hail is that, you know, for a tornado, it's kind of like throwing a dart at a dartboard, right? They're—they're not as widespread when they occur. They're not—they're not huge. Like, think about a hailstorm.

Maiclaire Bolton Smith: The footprint.

Jon Schneyer: The footprint, exactly. A hail footprint could be multiple states, you know, in two-inch hail. Tornadoes are pretty narrow. So it's a little bit harder or a little bit less likely, really, for a tornado to rip through a metro area. It's a lot easier for a big hailstorm to cover all of downtown Chicago.

Maiclaire Bolton Smith: Gotcha. Okay, no, that makes sense. I think one thing when we think of hail and hail damage is there's often these invisible types of damage, things that you may—that may happen but you may not uncover them till later. So things like leaking roof or maybe mold or shingle damage. Is that something that you looked at also is these kind of secondary, maybe invisible risks?

Jon Schneyer: Yeah, the invisible risk is what turns a, say, $20,000 complete roof job into maybe a $120,000 water mitigation, mold mitigation, and gut renovation. So what happens when hail falls on your roof, you might go out in your backyard and you might not actually see any visible damage, you know, especially from your front lawn. It's probably hard to see if there's even cracks in your—in your shingles.

Even if you went up on your roof—and I'm not suggesting you do, hire a professional, don't climb up on your roof, please—but if you were to go up there, you might not actually still see any damage when you're looking at those shingles. But these little granules that are on these asphalt shingles, they can get essentially eroded off. And as more of that happens, you get some cracks, you basically are destroying the watertightness and the integrity of that roof.

Now, it's not just hail or wind that occurs during a severe convective storm, there's usually rain too. It's severe weather, there's rain. So if you have a compromised roof and you have a lot of rain, or if you have a compromised roof and you don't realize it for a couple of months and you've had a number of storms, well, then you're talking about water intrusion. Then you're talking about the potential for mold, especially in the summer when it's hot and humid. And that's when a $20,000 roof job, which obviously no small expense, but that soon becomes a total gut renovation and mold mitigation. And that kind of invisible risk, yeah, something we're considering.

Maiclaire Bolton Smith: So I guess is there a way—I instantly my mind goes to mitigation—and is there a way to maybe limit that invisible risk and, you know, not prohibit, but limit that amount of extra damage that might be there that you might not find till later?

Jon Schneyer: Yeah, your roof is the first line of defense when it comes to hail. Right? If you just think about it from a physics standpoint, hail falls from the sky, what's the first thing in the way? And that's your roof. So, in terms of mitigation or increasing resilience to—to hail, yes, starts with the roof. We're talking about updating your roof. If your roof is 10 years old, 15, 20, it's probably time to think about a new roof even if you aren't experiencing any leaking or water intrusion or anything like that. Time to replace your roof.

Now, when you go to replace your roof, it's worth considering upgrading the materials you opt for to rebuild your roof. So if you know, if you're in one of these areas across the Plains, the Southeast, where hail is a common occurrence, let's talk about impact-resistant shingles, let's talk about maybe using metal materials, something that isn't going to be damaged by large hailstones.

Now, with all mitigation, right, there's typically a larger upfront cost. But for every dollar you spend now, you're saving yourself six dollars down the line in terms of reduced losses and the possibility of working with your insurance carrier to get credits on your premiums because you are proactively mitigating future losses at your property.

Maiclaire Bolton Smith: Yeah, that's a really important statistic. And I think, you know, across the board with everything from hail and tornado and wildfire, anything just the—the things, earthquake, the things that you can do to mitigate your home and yes, it's an upfront cost, but ultimately it is a potentially much bigger savings when it comes to there being damage. I think that's something that a lot of people don't necessarily think of, but insurers in particular are starting to think a lot more along those lines and in some cases in some—some states and some hazards are providing mitigative credits. So something I think definitely to keep an eye on.

Jon Schneyer: Yeah, and the stuff works, right? Mitigation works. So it's—it's worth investing in.

Maiclaire Bolton Smith: Yeah, it really does. And there's some pretty concrete examples, too, of success of mitigation in Florida from hurricanes that we've talked about on this podcast before.

Okay, so I guess let's talk a little bit more about measuring this risk. You talked about the exposure, you talked about the events actually happening. But would the ranking of Chicago coming out on top change if we looked at the historical frequency? Like, has the number or the severity of storms changed in the last year, or is it all because of the exposure?

Jon Schneyer: I think it's primarily driven by the exposure. Over a year—a single year to a single year—the volatility in storm frequency is going to be noise. If we're looking at one year versus the other, yeah, it's driven by the exposure. People are moving from either risky areas on the coast or really expensive cost of living-wise places like in the major cities along the coast. They're looking for warmer climates, they're looking for more space.

They're building newer, bigger, and due to things like inflation, tariffs, what have you, the materials needed to rebuild these homes if there is damage cost more, and the labor to rebuild costs more. So when we're talking about why is risk or insured losses increasing on a long-term basis, it's because there is more expensive vulnerable stuff that happens to now be in the way of these disasters. Now, right, severe convective storms over the Plains and Southeast isn't something new. For the longest time, those areas were just fields or forests, and right, for there to be risk, there has to be stuff. There wasn't stuff, there wasn't that much risk. Now there's stuff, now there's risk.

Maiclaire Bolton Smith: Yeah, and is it—I mean, that then is not specifically limited to the Chicago city itself. Like the surrounding areas of Illinois and, you know, other Midwest cities and Midwest areas, is—are we seeing a heightened risk there as well or a heightened not necessarily just risk, but a heightened level of loss?

Jon Schneyer: Yeah, I mean, we're looking at Illinois, for example—Chicago of Illinois—you know, ranks number two in terms of states with the number of homes with moderate or severe hail risk according to the Cotality's Severe Convective Storm Risk Report. But if we look at the about three million homes in Illinois worth about $1.5 trillion of reconstruction cost value with moderate-severe hail risk, so we'll see 1.7 million, 1.8 million of those homes—a little more than half—are in the Chicago metro area and about a third of the reconstruction cost value is concentrated in that city center.

So it's not that it doesn't exist elsewhere in the state, but when you have these big concentrations of risk, well, that's when you get big losses. These we call them tail-end events. They're really rare or rarer, but big industry-changing loss events that shift the insurance-reinsurance landscape and how we—how we think about these perils. It's not just Chicago, not just Illinois. A couple of other places that are worth highlighting across the Southeast, you know, Atlanta in Georgia—another area with a lot of concentration of risk that maybe would be a bit of a surprise because we don't typically think of hail, tornadoes, and wind in the Southeast, but it happens quite a bit. Again, area people are moving where cheaper cost of living, great climate—love Georgia—and a bit more space. So as people are building more, bigger homes, risk is increasing and we're seeing it in certain areas. Atlanta is a good example of that.

Maiclaire Bolton Smith: Sure. So I guess the other thing too that, you know, thinking from an insurer perspective is thinking about things kind of as a—a risk or a price house-by-house rather than just like a broad regional generalization. Is that a better way—better way for an insurer to view the risk across the US, or would it be best to still like very site-specific look property-by-property?

Jon Schneyer: Oh, absolutely better to think of this on a property-by-property, structure-by-structure basis. Regionalized generalizations worked when you didn't have the data streams or the technology that we have available today to process the flood of data that is available to companies like insurance companies.

There's no reason why you have to assume that all the homes in this county area, maybe outside the metro area versus inside the metro area, or within a mile of the coast or within five miles of the coast, there's no reason why you need to use a sweeping generalization. I know it was easier when there was this sort of data granularity or the data accuracy wasn't available, but with aerial imagery, satellite data, AI ability to process those images and understand exactly what is there at 123 Main Street—what kind of roof, how old that roof is, what materials the building is built out of, how old that building is—you can assess that vulnerability. Remember that third component of risk? You can really assess that vulnerability with a high degree of accuracy and precision.

And with all modeling, and a lot of things like risk selection or pricing is based on models, right? Junk in equals junk out is what we always say with models. But if you have high quality, a lot of precision, high accuracy in the inputs of that model, in the building characteristics, you know that the output of those model results are more likely to be reflective of reality.

Maiclaire Bolton Smith: Sure, yeah, and I mean, bit of a shameless plug, but I think that's one thing that we're really proud of here at Cotality is the data quality and just the structure-level analytics that we have for our hazard risk scores.

Jon Schneyer: Absolutely. The—the Cotality hail model that we used in this report to quantify moderate-severe hail risk across the US is accounting for the vulnerability of the individual structures. So if you have 123 Main Street and 125 Main Street right next door on the same street, if 125 Main Street was built in the last five years or the roof was replaced in the last five years, but over at 123 Main Street they haven't touched the roof in 20 years, well, one's going to have a severe hail risk—older roof, older home—one's going to have little to no hail risk—newer roof, newer home. So we look at all of that when we—when we tally up the totals that we presented in the risk report.

Maiclaire Bolton Smith: Interesting. Now, you alluded to other places like Georgia and such. Is—is there anywhere else to kind of be on the radar that's maybe unexpectedly vulnerable to hail that people might not be thinking about?

Jon Schneyer: Combination of vulnerable but also there has to be stuff. So think of your big city centers going across the Plains or the Southeast. So I'll throw a couple of other ones out there. Minneapolis, maybe a little further north than people expected to be a high concentration of hail risk, but that's in there. I don't think people think of Denver, Colorado as often when it comes to concentrations of hail risk, but also, you know, a spot where intersection of hail falling and a lot of big new expensive buildings in the downtown metro area that can contribute to that risk.

And then there's some that are less surprising. Obviously, your Dallas-Fort Worth, your Houston, Texas—those are up there. Same with your Austin, Texas, San Antonio, Kansas City, Missouri—also I don't think too terribly surprising if you think about areas that are frequently in the news and at the mercy of severe convective storms throughout the—throughout the year.

Maiclaire Bolton Smith: Sure, no, absolutely. I was just about to ask is so do we not need to worry about Texas anymore? But you've still got those Texas cities on that list as well.

Jon Schneyer: Let's face it, Texas, everyone who lives in Texas knows—I don't need to—I'm not from there but I don't need to tell you, right? You're going to get a lot of severe weather. There's always going to be hail, wind, tornadoes.

Now, the good thing is what I'll say is in these states or cities that are frequently impacted by these perils, it's sort of built into the either the building codes or the sort of mindset of homeowners. So there are a lot of more vulnerable—sorry, less vulnerable kind of new builds that are accounting for risk of natural disasters. And as people are more and more concerned with their—the insurance premiums, being able to pay those on a monthly basis, more concerned with losses and having to file claims, people are really thinking about risk mitigation when they move to new area.

What's really important, we always say, know your risk, accelerate your recovery. If you move from, say, a coastal Florida, you are accustomed to coastal flooding and hurricanes and you're like, "Well, I'm going to get away from that. I'm going to move to Georgia, or I'm going to move up towards North Carolina, South Carolina," you're like, "I'm going to get away from the coast." And you might not be expecting other perils to frequently impact your property. Just know that move from one area to another, make sure you do the research, know that if there's natural disaster risk that could have an impact on premiums, claims, losses at your property.

Allie Barefoot: It’s that time again. Cotality just dropped new numbers about what’s happening in the housing market. Here’s what you need to know. Summer in the US is being rewritten. While the Sunbelt is known for scorching temperatures, Cotality’s 2026 data revealed a shocking shift. Cooler climes are not immune to rising heat. Wisconsin, Michigan, and Minnesota are facing the nation’s largest jumps in heat risk.

The toll is even more staggering than the temperature. Miami-Dade County is facing a nearly 700% explosion in annual economic losses as heat-stressed water and energy systems buckle. Every single one of Texas’s 254 counties will see at least 20 additional heat wave days by mid-century. And Arizona has already seen a tenfold increase in heat-related fatalities over the last 20 years.

Resilience isn’t just a buzzword. It’s the only way to weather the upcoming financial storm. To learn more about how the property market is shifting, visit cotality.com/insights. There's also a link in the show notes. And that's a sip. See you next time.

Maiclaire Bolton Smith: Okay, Jon, you've been here enough to know that I like to end these with, "If you look into your crystal ball..." So hail is getting more—more difficult and more expensive to insure. So how do you anticipate insurers trying to insulate their property portfolios from these just growing losses?

Jon Schneyer: So, insurers charging actuarially sound rates based on model output, and that's leading to some of this, you know, increase in premiums year-over-year for homeowners in certain areas versus others. How are insurers insulating themselves against the shocks, financial shocks to their portfolio? Well, some ways to do that are to work with deductibles and limits. So you can either offer products with increased deductibles or smaller limits that kind of limits the amount of exposure to the insurer, puts a bit more onus on the homeowner so they don't necessarily have to self-insure, but in the event of a loss, they are going to have to cover a bit more of the losses up to a certain point depending on the deductible, and then from the deductible up to the limit.

The other thing we're seeing a lot of is the actual cash value versus reconstruction cost value stipulation within an insurance policy. So your roof, much like your car, for example, depreciates in value over time. If your roof is newer, it's worth more, but after 20 years, there's a way to determine that the actual cash value of your roof after 20 years is, say, a couple thousand dollars versus the $20,000 it's going to cost to replace it. So in some insurance policies, we're seeing, "All right, instead of covering your roof up to the reconstruction cost value, the RCV, that full $20,000, cover up to the actual cash value." Because you have an old roof, we'll pay up to $3,000, but the remaining 17, it's on you as a homeowner.

And that usually can result in a lower premium because there's less risk being accepted by the insurance carrier, things like that. So in terms of policy conditions, there's some ways that insurers can creative—get creative insulation. And then, you know, there's some ways to develop insurance products, things like parametric policies, aggregate reinsurance deals—whole lot of stuff that insurers can do to kind of make sure that they're—they're limiting the amount of risk they take on, which would result in higher premiums and trying to reduce the necessity to just go and say, "We're going to increase premiums." Let's work around it.

Maiclaire Bolton Smith: Well, Jon, this has been so interesting. Thank you for coming back and thank you, as always, for joining me today on Beyond the Buildings by Cotality.

Jon Schneyer: Thank you so much for having me. It's always a pleasure to be on.

Maiclaire Bolton Smith: All right, and thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released.

And thanks to the team for helping bring this podcast to life. Producer Jesse Devenyns, editor and sound engineer Romeo Roman, our facts guru, Allie Barefoot, and social media duo Sarah Buck and Michaela Brooks. Tune in next time for another conversation that will define the future.

Allie Barefoot: Still there? Well, thanks for sticking around. Are you curious to know a little bit more about our guest today? Jon Schneyer is a Director of Research and Content at Cotality. He's responsible for leading our market research and thought leadership team aimed at helping insurers navigate evolving risk landscapes. He oversees a team focused on delivering timely, data-driven insights to inform the strategic decision-making of our clients across the industry.

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