The deadly tornadoes that ripped through Alabama, Texas, and Mississippi yesterday represent only the latest blow already battered insurance-company reserves – and the economy as a whole.
Wednesday’s devastating tornados left more than 250 people dead, destroying homes and businesses and forcing a nuclear power plant to use its backup generators. Tuscaloosa, Huntsville and Birmingham, Alabama, were among the hardest hit.
But even before yesterday’s storms, the year was shaping up as a disaster for the insurance industry. The East Coast winter storms in January, flooding in Southern California and the Midwest, wildfires in Texas, and tornados in North Carolina and Oklahoma are adding to the long list of recent catastrophes for which insurance companies already are paying. Ultimately that is likely to mean rising insurance costs for all homeowners.
“If you combine it the winter storms that we’ve had and other things that have gone on earlier this year, it’s been a very active year, not only in the U.S., but worldwide,” Don Griffin, vice president at Property Casualty Insurers Association of America, told The Fiscal Times last week. “This may cause a gradual increase in premiums.”
Globally, extreme weather has become a multi-billion problem. Insured losses from weather events have jumped to an average of $27 billion annually from $5 billion over the past 40 years, adjusted for inflation. In the U.S., the severe weather is squeezing the already fragile budgets of governments at the local, state and federal level, which are using scarce resources for disaster relief and to keep roads clear. Many businesses, including retailers, restaurants and airlines, also suffer during weather disasters. The Commerce Department on Thursday attributed slower-than-expected GDP growth in the first quarter of 2011 partly to bad weather.