Twister damage may surpass $22 billion in insured losses.

As at least 18 states recover from more than 400 tornadoes, insurers are facing what could be the largest loss ever from a severe thunderstorm system--with one catastrophe-modeling company estimating the insured loss could exceed $2.2 billion.

Earlier estimates placed the damage at $325 million, but AIR Worldwide Corp. said May 14 that damage from the severe weather system, which leveled houses, overturned cars and sent trees crashing, would exceed the $2.2 billion loss caused by severe weather in April 2001. AIR uses a computer simulation model to project catastrophic losses.

Storms swept across 15 states beginning May 2 before hitting Oklahoma City on May 8 and 9, and more storms continued to cause damage through May 11. More than 50% of the losses occurred May 4 through May 6, according to AIR. The tornadoes formed when cold, dry air moving from the Rockies collided with warm, moist air from the Gulf of Mexico, the National Weather Service said in a statement.

The 18 states affected were South Dakota, Alabama, Arkansas, Georgia, Mississippi, Florida, Kentucky, Nebraska, Oklahoma, North Carolina, South Carolina, Tennessee, Iowa, Kansas, Missouri, Ohio, Indiana and Colorado.

Before the Oklahoma City tornadoes hit, the Insurance Information Institute's preliminary estimate of $325 million was based on a survey of affected insurers. But at least 300 more homes were destroyed when a tornado hit Oklahoma on May 8, and another 1,500 homes were damaged. Also damaged was a General Motors Corp. auto plant. According to the National Weather Service, the May 8 tornado was an F4 on the five-step Fujita scale. The storm injured 134 people. The May 3,1999, tornado that hit the same area was an F5 and killed 44 people.

Morgan Stanley estimated in a research note that the total property/casualty losses for the Oklahoma City tornadoes would be $200 million, with the top 10 property/casualty insurers responsible for $166 million. State Farm Group, the leading insurer for both homeowners and auto insurance in Oklahoma, faces an estimated $55 million loss, Morgan Stanley said. Zurich/Farmers Group, the region's second-largest insurer, might lose as much as $48 million, while No. 3 Allstate Insurance Group had $17 million in estimated losses.

As of May 15, State Farm said it had paid out $73.7 million throughout all 18 states since May 1, but some areas had been struck more than once, and the company didn't have a final estimate of the cost, said spokeswoman Ana Compain-Romero. About 39,700 homeowners claims and about 39,200 auto claims had been filed.

On May 12, Allstate said the company had seen 531 claims from the Oklahoma City area as of May 12, but it declined to give a loss estimate.

States most severely affected, according to State Farm, were Tennessee, where more than 6,800 homeowners claims and 7,200 auto claims were reported; Missouri, where more than 5,300 homeowners claims and more than 5,600 auto claims were filed; Illinois, where slightly more than 4,300 homeowners claims were filed; and Texas, where 7,200 auto claims were filed.

Ohio Casualty Corp., which has a high concentration of business in several of the states affected, said $12 million in pretax catastrophe losses, which occurred between April 1 and May 11, would impact second-quarter earnings. About $9 million of the estimated losses occurred in 17 states impacted by the May 2-11 storm system. The combined losses would affect the company's combined ratio-losses and expenses as a percentage of premiums-by about 3.5 points, Ohio Casualty said.

Montgomery, Ala.-based Alfa Insurance Group released estimated second-quarter storm losses of about $40 million, or 6 cents a share.

In Missouri, regulators have estimated the total storm cost to be about $400 million in insured losses, said Randy McConnell, communications director for the Missouri Department of Insurance, adding that the number was based on projections from insurance companies. The estimate doesn't include public facilities, insurance pools among local governments or self-insured local government losses.

Twisters of Fate

Between May 4 and May 10, a record 375 tornadoes were reported,
including no fewer than 90 on both the first and last days of the week.

Sun  94
Mon  23
Tue  54
Wed  33
Thu  48
Fri  33
Sat  90

Source: Accuweather.com

Note: Table made from bar graph