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Oklahoma Tornado May Cost Insurers Up to $3.5 Billion - RMS

Source: Dow Jones - Erik Holm

Posted on 29 May 2013 by Neilson

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Ok tornado loss estimatesThe powerful tornado that struck Moore, Okla., last week may have caused as much as $3.5 billion in insured losses, according to disaster-modeling company Risk Management Solutions Inc.

The firm says the massive twister damaged as many 20,000 buildings and completely destroyed between 4,000 and 5,000. About 95% of the affected buildings are residential structures, said Matthew Nielsen, director of model product management at RMS.

The firm's estimate of insured losses, ranging from $2 billion to $3.5 billion, is the latest sign that last week's deadly storms won't take a massive bite out of insurer profits. The Moore tornado appears on pace to cost the industry significantly less than last year's superstorm Sandy or a string of tornadoes that struck numerous states in 2011.

Damage estimates from RMS and other disaster-modeling companies are closely tracked by the insurance industry for the early indication they can provide about the financial impact of major catastrophes.

Catastrophe modelers produce their estimates by evaluating data about insured property in the affected areas and examining the damage on the ground.

A rival firm, Eqecat, on Friday said the Moore tornado and other storms that hit over a three-day stretch last week likely combined to cause between $2 billion to $5 billion in insured losses.

The estimates aren't directly comparable. While Eqecat said the bulk of its damage estimate was from the Moore tornado, it also included storm damage from several other states, including Kansas, Illinois, Colorado, and Texas. And Eqecat included the claims costs that car insurers could incur, while RMS excluded it.

State Farm Mutual Automobile Insurance Co. is the largest property insurer in Oklahoma, with a 17% market share. Farmers Insurance is second and Liberty Mutual is third, according to data provider SNL Financial. The largest publicly traded insurer in the state is Allstate Corp. (ALL), ranked fifth, with a 4.5% market share.