Record storm damage affects insurance companies

New damage estimates make the storms of May 2-11 the costliest tornado outbreak in U.S. history.

Currently, 350 companies have reported $1 billion worth of claims to the Insurance Information Institute.

A computer program known as AIR Worldwide estimated that total insurance losses in affected states will reach $2.2 billion, exceeding the April 2001 storm loss record of $1.93 billion.

According to the National Oceanic Atmospheric Admin-istration, there were 384 tornadoes reported across the United States between May 4 and May 11. The NOAA reported there were 89 Missouri tornadoes reported in the first 20 days of May. There have been 97 tornadoes reported in Missouri since the beginning of the year.

All reported sightings are being surveyed by members of the National Weather Service to determine the exact number of tornadoes. For May 4, the National Weather Service has confirmed 14 tornados in southwest Missouri and southern Kansas.

Andy Foster with the Springfield National Weather Service said the number of reported tornadoes is often more than the number of actual tornadoes. However, in the past 100 years, southwest Missouri has not faced a path of destruction of this magnitude, Foster said.

Right now, storm damage in Missouri is expected to reach at least $400 million, said Randy McConnell, director of communications for the Missouri Department of Insurance. Out of this $400 million, McConnell believes half of the damage is in southwest Missouri.

The majority of the insured loss is divided up among the most prominent insurance companies in the state, according to the Missouri Department of Insurance. State Farm Fire and Casualty is the largest home insurance provider with 24 percent of the market. American Family Mutual represents the second largest piece of the market with 20 percent. Farmers Insurance Group has 10 percent; Shelter Mutual has 6.7 percent; Allstate Insurance Companies, 5 percent; Safe-Co Insurance Company, 4 percent; Farm Bureau Town and Country, 2.6 percent and American National Property and Casualty, 0.7 percent.

State Farm

Ken Gunter, State Farm agency field executive, said in parts of Missouri, including Kansas City, DeSoto and southwest Missouri, 6,064 fire or homeowners claims and 6,800 auto claims have been filed. Costs of these damages are estimated at $60.5 million. Gunter said he is not surprised by the amount of losses.

"Our market share is higher than any other company. We have more homes insured, we collect more premiums, we have more losses; it all works together," Gunter said.

Money in the catastrophe fund will cover most of the damage. The amount needed for the fund is determined by a 20-year calculation. Gunter said all premiums have a statistically calculated charge for catastrophes based on a 20-year performance. Even when a major storm hits an area the ups and downs of that time period will average out rates.

"This will affect us but we are not going to try and add the $60 million of premiums back on to the premiums that we are charging right now," Gunter said.

Last year, State Farm raised homeowners' rates by about 40 percent. While some of the increase is blamed on the $1 billion hailstorm in April 2001, Gunter said legal battles also contributed to the increase. Also in 2002, State Farm stopped taking new customers in Missouri.

"If the risk we are taking on substantially outweighs the income we are taking in, then we would run a potential problem financially if we did happen to have big catastrophic losses." As far as limiting new customers in the future, Gunter said that depends on how much money is left in the catastrophe fund after claims are paid out.

American Family Mutual

Missouri's second largest home insurance provider reports a little more than 2,000 claims so far. These claims are 50 percent homeowners and 50 percent automobile. Storm damage for Missouri and surrounding states is an estimated $96 million for the storms of May 4-11. American Family's cost estimate for Missouri alone is $36 million. The company has already paid out $1.7 million in claims. David Gangaware, catastrophe operations administrator, said the company expects the final number of claims to be 2,200-2,500.

Ken Muth, media relations director, said the storm is significant but does not top American Family's highest claims.

"We've experienced storms like this in the past. Tornadoes are very severe in damage, but compared to hailstorms, they are isolated. We've had hailstorms that caused significantly more damage than the $36 million we will be paying in Missouri," Muth said.

To help finalize claims and help victims of the storm, American Family has placed catastrophe teams in damaged areas throughout the state.

Farmers Insurance Group

With about 10 percent of the market share and a significant share in rural areas. Farmers Vice President and Executive Director of Missouri Jim Swope said the company is prepared for the loss. As of May 22, the company had 2,261 claims, with $22 million to $25 million estimated losses for Missouri.

Shelter Mutual

Shelter has reported 1,695 claims in southwest Missouri with an additional 1,000 claims expected. However, Shelter's total number of storm claims for six states including Missouri is 16,395.

"It is probably going to be a record loss. We've been in business about 55 years, and this one has all the makings of a record for us," said Joe Moseley, vice president of public affairs for Shelter.

An additional 19 insurance adjustors are helping to evaluate the damage and close open claims. As of last week, Moseley said, 792 claims still needed to be inspected.

"There probably will still be more. From experience in the past, people hold off, thinking, Well, mine is not as serious as somebody else' We hope there aren't very many of those left," Moseley said.

Multistate catastrophes are cutting into Shelter's surplus, Moseley said. Currently the company has a $700 million surplus that can be used for major storms. Moseley said the company maintains a dollar-for-dollar, premium-to-surplus ratio. Future rates and limits on new writings depend on what happens to this surplus.

"One event does not often impact us much because rates are based on a longer period of time but if you have something of this magnitude it can skew even 10-year histories," Moseley said.

Other companies

According to the Missouri Department of Insurance, there are 160 different insurance companies dealing in homeowners insurance. And 152 companies make up 27 percent of the marketplace. However, companies like Allstate, Safe-Co, Farmers Bureau Town and Country and American National Property & Casualty have been affected.

By May 12, Allstate had 1,400 claims with at least seven homes completely destroyed.

Farmers Bureau Town and Country officials estimated $4.3 million in damage and 2,550 claims as of May 12.

Safe-Co Insurance, based in Seattle, Wash., has not calculated claims yet.

American National Property and Casualty, which has less than 1 percent of the market in Missouri, estimates losses to be $4.1 million for the state, $2.2 million in southwest Missouri. Total estimates could reach $11 million in a five-state region.

Even though the loss is sizeable, Jerry Jones, claims supervisor for ANPAC, said the loss is minimal compared to the size of the company.