Tornadoes a ‘Wake-Up Call,’ FM Global’s Gritzo Says

The surge in tornado frequency and severity in recent years should be a “wake-up call” that storm patterns may be returning to historic levels, said Lou Gritzo of insurer FM Global.

“If you look back to the 70s and even to the 50s, you see a number of events that were significantly greater,” Gritzo, FM Global’s manager of research, said today at an insurance conference sponsored by Advisen Ltd. in New York. “The return to normal in terms of events should really be a wake-up call.”

Twisters killed 541 people last year in April and May, compared with six deaths in the two months this year, the U.S. National Weather Service said. Insured losses from severe weather in the U.S. were about $1 billion in April, lagging behind losses of roughly $16 billion from tornadoes and other severe weather in April and May of 2011, broker Aon Plc estimated.

Last year’s storms included a May 22 tornado that tore through Joplin, Missouri, killing more than 125 people, as well as deadly twisters in Tuscaloosa, Alabama, and Springfield, Massachusetts. The 2011 tornado season was the third most active since 1980 with more than 1,550 confirmed storms, according to CoreLogic Inc., a Santa Ana, California-based data provider.

Tornado damage, once largely confined to rural areas, is increasingly being seen in more developed and populated parts of the country, David Finnis, national property practice leader at insurance broker Willis Group Holdings Plc, said at today’s conference.

“What we rarely have seen are those EF-5s hitting a large building,” Finnis said, referring to the most powerful tornadoes.

Tornado Alley

Twisters have historically been associated with the corridor known as Tornado Alley, which 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.

That pattern may be changing. Of the 10 states with the highest number of twister touchdowns between 1980 and 2009, only three were in Tornado Alley, according to a March 22 report from CoreLogic. Property damage from storms in Tornado Alley was an estimated $2.5 billion from 2000 to 2011, compared with nearly $15.5 billion in 16 states outside the region, according to the report.

The number of deadly storms occurring outside the corridor has “called this long-held notion of risk concentration in Tornado Alley into question” and “forced many insurance companies to rethink the way they assess natural hazard risk,” Howard Botts, a CoreLogic vice president, said in the report.

Insurers that raised prices after last year’s disasters are gaining as claims costs drop. Allstate Corp.’s net income jumped to the highest since 2007 in the first quarter and operating profit at New York-based Travelers Cos. beat analysts’ estimates. The Standard & Poor’s 500 Property & Casualty Insurance Index advanced 4.1 percent this year through yesterday, compared with a 1.6 percent gain in the S&P 500 Index.

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