Insurance claims and loss estimates are beginning to come in from the group of deadly and damaging tornadoes that moved through the central and southern U.S. last weekend.
The Federal Emergency Management Agency confirmed there were at least 52 tornadoes that moved through parts of six states – Arkansas, Illinois, Kentucky, Mississippi, Missouri and Tennessee – the largest of which touched down for more than 200 miles.
In addition to destroying thousands of homes, the storms trapped employees inside a factory in Kentucky and collapsed an Amazon building in Illinois. Overall, there have been at least 90 fatalities, according to FEMA. Of those deaths, 74 of the fatalities were in Kentucky, where 18 counties were impacted.
Property data firm CoreLogic reported 14,844 residential structures that were impacted and likely destroyed in the six affected states, with a total reconstruction value of $3.7 billion. Of these totals, 11,762 of the homes were in Kentucky, with a reconstruction value of $2.9 billion. Overall, the percentage of these homes that is insured is unknown.
Reuters reported President Biden toured the storm damage in Kentucky today, with White House deputy press secretary Karine Jean-Pierre telling reporters the goal was to ensure the U.S. government is doing everything it can to deliver assistance as quickly as possible to the hard-hit areas.
In one of those hard-hit areas – Mayfield, Kentucky – a candle factory was destroyed with workers still inside, Insurance Journal previously reported. Dwight Lovan, a recently retired judge of compensation claims in Owensboro, Kentucky, said it’s still early, but indications are that the tornado strike at the factory may result in the largest number of work-related death claims from a single work site.
The good news, Lovan said, is that the death toll at the candle factory appears to be 20, which is much lower than initially feared. All workers trapped inside the factory have since been accounted for, according to FEMA.
Four Mayfield critical public facilities – a police station, fire station, county courthouse and county jail – have all been rendered uninhabitable by the storms.
The Kentucky Department of Insurance issued an advisory to insurers, producers and adjusters on working with clients during storm recovery. The advisory permits insurers to extend time periods for customers to pay premiums, copayments, deductibles and other charges under the current state of emergency until at least January 10, 2022.
As the storms have impacted mail delivery, the department also encouraged insurers to refrain from taking actions against policyholders such as canceling or non-renewing policies and implementing rate increases until proper notice can be given.
Kentucky Farm Bureau (KFB) Insurance, which wrote $265 million in direct written premium in the state’s homeowners line in 2020, said all of its agencies and 15 regional offices across the state, as well as its state office in Louisville, remain open. The company said it is “immediately and until further notice” temporarily suspending insurance policy cancellations that result from non-payment of premium.
“Since sun up on Saturday, Kentucky Farm Bureau Insurance agents and staff have been on the front lines in the western portions of our state, assisting our member families and surveying the damage left by this past weekend’s historic outbreak of tornadoes and severe weather. Those storms brought the commonwealth incredible damage and, sadly, great loss of life,” said John Sparrow, executive vice president and CEO of KFB Insurance. “It will take some time to fully measure the significant impact of this storm, but with so many lives lost, homes and farms and businesses completely leveled, autos buried under trees and other structures, and countless livestock killed, it is difficult to classify this as anything other than devastating and historic.”
He added that in just a few days, KFB Insurance has already received thousands of claims, with the number growing daily.
AM Best noted that losses in Kentucky may be spread out among insurers in the Kentucky market, which it describes as not concentrated. State Farm (19.6%) and Kentucky Farm Bureau Group (18.2%) lead in market share for the impacted commercial and personal lines. Other carriers in the top five are Liberty Mutual (8.8%), Allstate (5.6%) and USAA (4.8%).
“The damage that has come from these storms is far reaching,” said Gina Wilken, a public affairs specialist at State Farm, which is assisting clients in all six affected states. “The destruction is pretty intense.”
State Farm Fire & Casualty Co. wrote $305 million of the $1.3 billion direct premium in Kentucky’s homeowners line in 2020, according to ALIRT Insurance Research.
“We started seeing claims come in slowly,” Wilken said. “They started coming in Sunday night and Monday morning.”
Currently, State Farm has seen 9,500 claims across all impacted states, with Kentucky having the highest amount of claims at 2,800. However, she said that number will likely rise.
“We expect that claim count to continue rising as the communities are recovering,” she said.
Early insured loss estimates of damages across the six states range from $3 billion to $5 billion.
Insurance ratings agency Fitch Ratings said the recent tornadoes were the largest catastrophic loss event of 2021’s fourth quarter, and while they’re expected to generate significant economic and insured losses, they’re likely to be an earnings, not a capital, event for individual property/casualty insurers and reinsurers.
Fitch said the insured loss from the tornadoes could rival the $5 billion insured loss from the U.S. Midwest derecho event in August last year, with Kentucky suffering the largest loss of life and damages. It added that the tornadoes will likely drive insurance industry natural catastrophe losses to the largest annual total in the U.S. since the 2017 record year of approximately $130 billion.
AM Best said insured losses are likely to be concentrated in the commercial multiperil and homeowners lines, with some losses borne by auto physical damage as well. Also, most of the losses should be limited to primary insurers.
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