Tornadoes in the US

The insurance industry expects the United States to see a sizeable earthquake once every few decades, a major hurricane every few years, and hundreds of tornadoes each year.


In 2011, the US experienced a record number of long track, violent tornadoes which produced a record amount of aggregate insured losses. These loss levels and the multi-billion dollar occurrence outbreaks shouldn’t have come as a surprise since we’ve seen several other previous years where the losses, after being normalized for wealth and population, had equalled or surpassed the 2011 levels.

What should be a surprise is that we haven’t seen more major EF4 and EF5 tornado outbreaks striking densely populated and developed areas. Despite the voluminous number of tornadoes observed each year there remains an infrequent number of EF4 and EF5 tornadoes. Historically whenever these large events have occurred they’ve missed the highly concentrated areas of wealth within any major US city.

What would happen, for example, if Chicago was to be hit by a powerful tornado?

Swiss Re's Cat Perils team used a pragmatic approach to project what could happen if one of the past powerful tornadoes were shifted to hit one of today’s larger population centers. The approach taken by the authors of this paper is simple, easy to understand, and offers us another opinion that can be used to ground our future expectations of loss.

Clearly tornadoes are a complex and costly risk that can produce losses much greater than we’ve experienced to date. We as an industry should always be financially prepared for when that unfortunate inevitable day comes.

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