NU Online News Service, June 6, 2:32 p.m. EDT

Alfa Insurance, Alabama’s second-largest writer of homeowners insurance, says it is dropping 73,000 policies over the next 16 months following the costliest storm in the company’s history.

Severe weather, which included destructive tornadoes, battered Alabama on April 27. Alfa expects 25,000 claims from the storm, and while this total is less than half of what the company received from Hurricane Ivan in 2004, the severity of the tornado claims will make the late-April event Alfa’s costliest ever, the company explains in a statement.

Alfa President Jerry Newby says the “increased frequency and severity of storms over the last decade have highlighted the need for Alfa to review its overall property portfolio.”

Nonrenewal notices will mostly affect landlords of multiple-tenant houses and homeowners that have just one property policy with the company, Montgomery, Ala.-based Alfa says in a statement.

Alfa Insurance Group in 2010 held 17.7 percent of the homeowners insurance market share in Alabama, eclipsed only by State Farm’s 28.2 percent share of the market, according to Highline Data.

Alfa says it will still have about 350,000 property policies in Alabama to go along with 700,000 automobile policies.

Nearly 70 percent of Alfa’s direct premiums written comes from its home state, which took the brunt of the late-April storms. Catastrophe modelers have put insured losses from the storms at between $2 billion and $6 billion. Modeler Risk Management Solutions says 70 percent of the losses it estimates can be attributed to damages in Alabama.

Newby says the April tornadoes were within the company’s reinsurance program and the company was “well prepared for the storm.”

He adds, “This storm, however, was unlike anything the insurance industry had anticipated, and it required us to reevaluate our current marketing and underwriting efforts.”

The company had already placed restrictions on new business writings in Alabama, but Alfa says it expects to make changes to its underwriting guidelines in the future.

Alfa Insurance Group reported underwriting losses in 2010, 2009, 2008 and 2006, according to Highline Data. Alfa posted 2010 net income of about $26.8 million, with an underwriting loss of $58.6 million and a combined ratio of 105.