If you’re a broker with clients in southeastern Louisiana or Tornado Alley, then watch the weather network year-round and keep one hand on your client-alerting service.
That’s the advice from Core Logic’s senior modeler and actuary, Howard Kunst, in retrospect to early February’s six-tornado-disaster that saw the first EF3 tornado (maximum is EF5) in history rip through New Orleans.
Despite both the magnitude and multitude of those Louisiana tornados, Kunst said the risk assessment hasn’t changed but does remind everyone this kind of storm can happen anytime of the year.
“As they (insurers) write in these areas, they need to account for concentration of risk so they don’t have a large amount in any one area,” Kunst said.
“Hail events and tornadic events are very localized and insurance companies have in the past, where they’ve had a large concentration in one area… had massive losses.”
Building codes are one of the most notable defenses against tornadoes and Kunst made the point that New Orleans already has Hurricane-resistant codes.
“Tornados have a bit higher, especially an EF3, higher wind speeds than any standard hurricane, so there will be some building codes that need to be upgraded,” Kunst said.
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“What the insurers need to do is make sure all the building codes are being followed and they’re reviewing the underwriting of each account they’re adding to the books.”
Much like flooding, tornados have risk zones - from low to extreme - but unlike flooding these designations don’t disqualify homeowners from private insurance, in part because of tornados’ infrequency.
“Excluding places like Moore, Oklahoma, where they’ve been hit a couple times, the probability of any one location getting hit is still pretty small,” Kunst said.
“Which is the reason why you need to make sure you are diversifying your risk within those locations, not just writing (policies) in one spot.”
Louisiana was designated a disaster zone following the devastating twisters that ripped through the state destroying homes and businesses in its wake.
“When an area is designated a disaster, federal money is more readily available to help people get back on their feet and get people going,” Kunst said.
“It really speeds up the process of getting individuals rebuilding their homes and businesses.”
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