As the industry keeps changing, it's important to know a company's "pedigree."
As insurers continue to process and pay claims related to a month of violent storms, Risk Management Solutions estimated insured losses from a twister outbreak April 25 through April 28 will total $3.5 billion to $6 billion, the highest figure to date from modeling firms.
If the top of the estimate is reached, the storms will be the costliest tornado and thunderstorm event in the United States.
The estimate includes losses from personal, commercial, automobile, and industrial lines of business in Alabama, Georgia, Tennessee and other states, and represents structure, contents, and time-element coverages, RMS said. Alabama experienced the majority of the violent tornadoes and accounted for approximately 70% of the overall loss, RMS said.
"This tornado outbreak is set to become one of, if not the, costliest severe convective storm event in U.S. history," Matthew Nielsen, product manager at RMS, said in a statement. Severe convective storms can produce tornadoes, hail, lightning and powerful straight-line wind gusts.
Should losses exceed $3.2 billion, the tornado outbreak would become the insurance industry's costliest tornado and thunderstorm event, exceeding losses from severe storms in May 2003, according to Catastrophe Review, an A.M. Best Special Report dated May 16, 2011.
The May 2003 event, which involved about 400 tornadoes that hit Missouri, Kansas, Oklahoma, Tennessee, Illinois and other states over a two-week period, caused $3.2 billion of damage, or $5 billion in today's value, according to RMS.
Nonetheless, the industry remains well capitalized, said Andrew Colannino, vice president of property/casualty ratings at A.M. Best. The month of severe storms will be an earnings event, not a capital event, added Richard Attanasio, vice president of property/casualty ratings at A.M. Best.
That upper end of the RMS estimate is above earlier estimates by AIR Worldwide, which has said insured losses from the severe thunderstorms and tornadoes April 22 through April 28 total $3.7 billion to $5.5 billion (BestWire, May 9, 2011), and Eqecat Inc., which anticipated insured losses as high as $5 billion (BestWire, May 2, 2011).
As of May 13, State Farm, the largest U.S. personal-lines insurer by market share, had some 96,000 fire claims from four storm systems that hit 17 states between April 14 and April 29, according to spokesman Dick Luedke. Those are mainly homeowners claims, but also include renters, condo units and some commercial insurance claims. The carrier had roughly 37,000 auto claims from one storm system that hit 10 states in late April.
Those claims numbers will grow, Luedke said. In addition, the carrier is dealing with claims from less-publicized catastrophe activity across the country, and has more than 4,000 claims representatives currently working across the United States.
USAA Group is processing some 35,000 claims for the month of April, spokeswoman Rebecca Hirsch said. Earlier, Allstate Corp. said it will incur an estimated $1.4 billion in catastrophe losses from 13 events in the United States and Canada, mostly from the deadly tornadoes that pummeled the nation's midsection and south the final week of April, and had received more than 100,000 claims as of about May 10 (BestWire, May 12, 2011).
State Auto Financial Corp. reported its second-quarter earnings will include pretax catastrophe losses between $75 million and $85 million, net of estimated reinsurance recoveries. The company said it anticipates more than 15,000 claims related to tornadoes, wind and hail in 20 states.
April was an unusually active month for tornadoes. Earlier in the month, a storm system brought violent weather to Oklahoma and hail in Texas, and on April 16 spurred tornadoes in North Carolina, Virginia and other states, causing widespread damage. In the wake of the April 16 twisters, more than 8,000 people registered for disaster assistance, according to the Federal Emergency Management Agency. On April 22, the most powerful tornado to hit St. Louis County in 44 years blew windows from the main terminal building and peeled off a section of the airport roof (BestWire, April 27, 2011).
Since 1989, there has been a rising trend in insured losses from severe thunderstorms and related weather events, attributed to rising property values, greater building density and more insurance coverage, according to the A.M. Best Catastrophe Review special report.
(By Diana Rosenberg, senior associate editor, BestWeek)