Midwest Storms Cost Insurers $380 Million

Storms and tornadoes that tore through the Midwest in the first half of the month created two catastrophes with insured losses of $380 million, Property Claims Services reported.

According to Gary Kerney, assistant vice president of PCS--a unit of the Jersey City, N.J.-based Insurance Services Office--the total covered loss for Cat. No. 17, which took place from Aug. 10-11, is $160 million.

The PCS estimate of insured property damage from Cat. No. 18, which occurred Aug. 13-14, is $220 million, and both catastrophic losses are classified as "Wind and Thunderstorm Events," including flood, hail, tornadoes and wind in Minnesota and Wisconsin.

With severe weather continuing in the Midwest, much of the damage involves property losses not covered by private carriers, such as mudslides or flooding.

According to Jean Salvatore, a representative of the Insurance Information Institute, in a standard homeowners policy there is no coverage for mudslides.

In flood policies issued by the National Flood Insurance Program, she said there is coverage for mudflow, but "standard homeowners does not have any coverage for this at all."

Private insurers provide no mudslide coverage, she said, because such events are generally very rare, which makes them difficult to underwrite and price for--unlike fires or windstorms.

According to a 2006 Rand Corp. study, conducted for the NFIP, nationwide about 49 percent of single-family homes in special flood-hazard areas were covered by flood insurance in 2004.

In the South and West, the percentage is higher--about 60 percent. However, outside of the high-risk areas, there is a steep drop-off in coverage. Only about 1 percent of homeowners in non-flood hazard areas purchase the coverage.