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Insurers Rattled by U.S. Storms in 2011 Beyond Tornado Alley

Insurers are being forced to re-think their models after tornadoes killed more than 550 people in the U.S. this year, data provider CoreLogic Inc. said.

More than 1,550 confirmed tornadoes had been reported in the U.S. as of Dec. 1, making it the third-most-active season since 1980, according to a report today from Santa Ana, California-based CoreLogic. The death toll from the storms was about the same as the number of fatalities from U.S. tornadoes in the prior 10 years combined, the report showed.

“In the past, companies were confident they had an accurate underwriting knowledge of the areas, such as ‘tornado alley,’ that resulted in the greatest claims,” CoreLogic said in the report. “During the past few years, however, property, casualty and commercial insurers have begun to realize they need to carefully re-evaluate this perception.”

Travelers Cos. Chief Executive Officer Jay Fishman said his company is boosting rates after reassessing U.S. storm risk in the wake of tornadoes that struck Tuscaloosa, Alabama; Joplin, Missouri; and Springfield, Massachusetts. A surge of storms in April and May cost the insurer more than Hurricane Katrina and fueled a second-quarter loss. Allstate Corp., the largest publicly traded U.S. home and auto insurer, also posted a loss in the period on the tornadoes.

Tornado Alley stretches from central Texas to northern Iowa, and from central Kansas and Nebraska to western Ohio, according to the National Climatic Data Center. The region is known for a high frequency of storms in months including April and May.

Wind, Hail

“For many companies, the result of actuarial analysis of claims loss against granular damaging winds and hail geospatial databases has led to a considerable expansion of areas now considered higher risk for wind and hail claims loss,” CoreLogic said.

Losses from floods in the U.S. were also higher than average this year, costing about $10.7 billion. Tropical Storm Lee and Hurricane Irene hit states such as Pennsylvania and New York, and further damage was caused as the Mississippi and Missouri Rivers swelled beyond their banks after heavy precipitation and the melting of an above-average snowpack.

Extreme flood losses are not expected next year, based on cyclical trends, CoreLogic said. Still, the losses in 2011 have increased awareness of the risk outside of 100-year flood zones, according to the report.

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