2017 & 2018: Largest Back-to-Back Insured Tornado Losses in US History

The latest research report from Kroll Bond Rating Agency (KBRA), titled Insured Losses Rising for Tornadoes, looks at the rising risks of tornadoes. As the reporting of tornado events increases, KBRA believes the enhanced exposure to these severe weather events warrants greater implementation of tornado risk in companies' cat models.

In the report, KBRA notes the start of spring marks the beginning of peak season for tornadoes. The reminder came a little earlier than usual this year when a powerful tornado, which resulted in the tragic loss of 23 lives, devastated Lee County, Alabama, on March 3. The National Weather Service said the tornado was a category EF4 storm, which was part of a system that also barreled through sections of South Carolina, Georgia, and Florida with wind speeds of 170 miles per hour. The weather event cut a nearly 1 mile-wide path and stretched over at least 24 miles.

With hurricanes grabbing the headlines in 2017 and 2018, and significantly contributing to the largest back-to-back years of insured losses in US history, KBRA notes that tornadoes can produce more devastating winds, and over the longer term, contribute to nearly half of insured windstorm losses. With no hurricane activity from 2013 through 2015 and just a near miss from Hurricane Matthew in 2016, tornado losses made up the majority of US catastrophe losses in those years.

According to the rating agency, all but one of the top 10 costliest tornadoes in US history were in the months of March, April, or May, while three of the costliest tornado outbreaks occurred in Spring 2011 alone. Although a tornado's damage zone is significantly smaller compared to hurricanes, these funnel-shaped storms pack wind speeds that approach or exceed 200 mph, making for a generally more severe impact area. Joplin, Missouri, has the unfortunate distinction as the location of the single costliest tornado in history when on May 22, 2011, one caused insured losses of around $2.8 billion. KBRA previously noted that 3 insurers—Barton Mutual Insurance Co., Gateway Mutual Insurance Co., and Cape Mutual Insurance Co. (with a combined 41,000 policyholders who held homeowners and fire policies)—became insolvent due to the Joplin tornado.

Complimentary access to the full report, Insured Losses Rising for Tornadoes, is available on the KBRA website with registration.