Allstate is now estimating catastrophe costs of $2 billion before taxes for the quarter (with a month to go).
The spike in claims comes from a series of severe tornadoes that killed hundreds of people and caused extensive damage in Alabama, Missouri and more than a dozen other states. Disaster-modeling company AIR estimates a cluster of twisters in late April and another in late May were the two largest tornado losses on record, and caused up to $12.5 billion in insured losses combined.
Other insurers have also warned of substantial losses. Travelers Cos. said last week it was curtailing its stock-buyback program as it estimated after-tax losses of about $1 billion for April and May.
For Allstate, the second quarter promises to be its most expensive for natural disasters since Hurricanes Katrina and Rita caused the company to report $4.71 billion in catastrophe costs in the third quarter of 2005.
While the record-breaking hurricanes of 2005 caused the insurance industry to boost its expectations of losses along the East Coast and Gulf of Mexico, the increasing severity of thunderstorms, hailstorms and tornadoes across the Midwest in more recent years has also caused many insurers to raise prices, increase deductibles and limit new sales.
Allstate has been among the most vocal about its efforts to limit its losses from such events.