A convective storm system that sparked a major outbreak of tornadoes across eight U.S. states on Dec. 10 and Dec. 11 could generate losses in the tens of billions of dollars when the final figures are tallied.
Total economic losses from the storms could reach $18 billion, AccuWeather CEO Joel Myers estimated, which would make this the costliest tornado outbreak in U.S. history. The current record is $10.2 billion in losses, generated by the "super outbreak" across the Southern U.S. that spawned 362 tornadoes between April 25, 2011, and April 28, 2011. That outbreak saw 226 tornadoes spin up on April 27, 2011, alone.
Catastrophe modeler Karen Clark & Co.'s first estimate for insured losses stands at $3 billion. The estimate includes damage to privately insured automobiles as well as to residential, commercial and industrial properties.
A total of 34 confirmed tornadoes, seven of which were given an EF-3 strength rating, swept through Arkansas, Missouri, Mississippi, Kentucky, Tennessee, Illinois, Indiana and Alabama, destroying thousands of homes, businesses and farms. The confirmed death toll as of Dec. 15 was 90, though that number could move higher.
One of those reported EF-3 tornadoes cut a 220-mile swath through Arkansas, Missouri, Kentucky and Tennessee. The Bluegrass State was the hardest hit of those four, with 80 deaths confirmed there so far.
CoreLogic estimated the outbreak destroyed 14,884 residential structures, with a reconstruction value of $3.7 billion. Again, most of that damage occurred in Kentucky, where 11,762 homes were destroyed, with an estimated replacement cost of $2.8 billion.
Kentucky takes the brunt
The Kentucky Farm Bureau Federation has already received thousands of claims, CEO John Sparrow said in an email, and that number grows daily. In terms of agricultural loss, Sparrow said the majority of Kentucky's farmers had completed their harvest this season, so field and crop damage has been minimal. However, some grain storage bins and elevators were damaged or destroyed.
While much of the attention has been focused on Mayfield in Southwestern Kentucky, where at least 50 people were killed, other locations across the western part of the state suffered similar significant damage, Sparrow said. Bowling Green is where the bureau's highest claim count exists. Hopkinsville and the surrounding counties have also been severely affected, as have Millport and Dawson Springs, said Sparrow.
"It will take some time to fully measure the significant impact of this storm, but with so many lives lost, homes and farms and businesses completely leveled, autos buried under trees and other structures, and countless livestock killed, it is difficult to classify this as anything other than historic," Sparrow said.
The Kentucky Farm Bureau Federation is the top writer of commercial multiperil policies in Kentucky and the second-largest private auto and homeowners insurer in the state, according to S&P Global Market Intelligence data.
Cincinnati Financial Corp. has sent additional claims representatives with specialized training in complex property claims to assist local units, Betsy Ertel, a spokesperson for the company, said in an email. The insurer is also assessing the need for additional claims representatives in areas such as Bowling Green and Mayfield, Ertel added.
The Progressive Corp. has not disclosed how many claims it has processed, but spokesperson Jeff Sibel in an email said the company has declared this a catastrophe event for the entire state of Kentucky.
Several community banks have significant exposure to areas affected by the tornado. Aggregating deposits from the seven counties designated by the Federal Emergency Management Agency as disaster areas, there are seven banks with more than 50% of their deposits from the affected area. Mayfield-based Jackson Financial Corp. holds the most deposits of any bank in its home county of Graves at $298.7 million, which represents more than half of the bank's deposits.
Historic storm system
The tornado outbreak was caused by three elements coming together simultaneously, said AccuWeather Chief Meteorologist Jonathan Porter. He said alone, strong storm system was influenced by a "jet stream disturbance" that came from a storm in the Rocky Mountains and produced "widespread snow" across the Western U.S. The final element was warm, moist air drawn from the Gulf of Mexico, where Porter said water temperatures are running well above normal. That triggered the outbreak, particularly the massive tornado that swept through Kentucky.
Porter said the event was similar to the outbreak which produced six tornadoes that hit Long Island, N.Y., on Nov. 13 as warm water off the East Coast provided fuel for the storm system.
"A lot of the ocean water temperatures are running above normal across the globe in the last several years," Porter said in an interview. "It's likely a strong contributor to why the water in the Gulf of Mexico is warmer than normal, and also why the water off the East Coast is warmer than normal."
Porter said AccuWeather is looking to launch a program whereby its warnings are delivered directly to insurance company policyholders for severe weather events such as tornadoes.
"The insurance companies and brokers have realized that ... in some weather situations like hail storms and wind events, they can reduce the risk for claims," he said.