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Cost of December Tornado Outbreak Expected to Be Within Historical Range and Manageable for U.S. P&C Insurers

Multiple U.S. states experienced a series of deadly tornadoes on December 10 with early reports indicating substantial property damage. While severe, this event is expected to produce insured losses within historical levels for the U.S. property and casualty (P&C) insurance industry, which is sufficiently prepared to cover these claims without significant capital impact. Overall, we expect that P&C insurers with substantial business in the affected states will incur a moderate earnings impact.

Key highlights include:

-- The December 10 U.S. tornado storm is likely the most severe since the 2011 super outbreak.

-- The frequency of severe tornadoes appears stable over time, but the resulting economic damage is increasing.

-- Insurers are well prepared for insured losses, which should remain within historical levels with limited capital and credit quality impacts.

“The U.S. experiences more tornadoes than any other country in the world, with up to a thousand reported every year,” said Patrick Douville, Vice President, Insurance. “NCEI data suggests that the occurrence of severe tornado events has been relatively stable over time with this storm likely to be the first to include an EF-5 category tornado since 2013. However, with growing population and urban development in the Tornado Alley over the years, tornadoes are causing more in damages.”