Lloyd’s managing agent Argenta says the freak tornado outbreak which devastated multiple US states over the weekend could drive industry losses as high as $7 billion.
Analysts believe the most suitable comparison to a past event is a derecho that hit Iowa in 2020.
A derecho is essentially an inland hurricane consisting of fast moving thunderstorms. The one which impacted Iowa and beyond two years ago left 300,000 homes without power and, according to Swiss Re’s Sigma Research, racked up an insurance bill of $7 billion.
Argenta analysis shows that the derecho event added roughly 2 percentage points to the 2020 loss ratios of supported syndicates (about 1.5% of allocated capacity).
Furthermore, over 97% of the loss amount was allocated to the 2020 year of account.
Analysts’ early expectation would be an event of similar magnitude for syndicates’ 2021 year of account arising out the weekend’s losses.
Regardless, the aggregate of losses across several states is likely to amount to a material sum for insurers and their reinsurers.
The outbreak’s intensity and longevity is rare for this time of year, with tornadoes often a spring phenomenon that can impact across the US Midwest.
December is traditionally a quiet month for storm formation. Despite this, one tornado is reported to have tracked across Arkansas, Kentucky, Missouri and Tennessee, a path 227 miles long and reported as the longest path ever.
Argenta notes that Kentucky appears to have been the most severely impacted state, with the town of Mayfield sustaining widespread destruction and loss of life.
President Biden has declared a state of emergency in the state, ordering federal assistance to complement local emergency responders.
Outside Kentucky, an Amazon warehouse in Edwardsville, Illinois was badly damaged. More than 150,000 homes were left without power across the region.