RMS estimates up to $3.5 billion insured losses from Oklahoma tornado

Risk Management Solutions (RMS) is the second catastrophe risk modelling firm to come forwards with an estimate of the insured losses from the recent Oklahoma tornado event. RMS has focused solely on the single tornado that struck the town of Moore and estimates the insured loss toll to be between $2 billion and $3.5 billion.

Last week EQECAT issued the first insured loss estimate for the Moore tornado event, but also included all tornadoes that hit the U.S. midwest from the 18th to 20th May, including the Moore tornado. So it’s no surprise that EQECAT’s insured loss estimate was higher at $2 billion to $5 billion.

The estimate from RMS is right in line with other industry observers and would put the losses from the Moore tornado higher than those caused in 2011 by the Joplin tornado, which is again in line with other anecdotal estimates.

RMS said that as many as 15,000 to 20,000 buildings were damaged by the Moore tornado with up to 5,000 completely destroyed. Director of model product management at RMS, Matthew Nielsen, commented that around 95% of the property destroyed consisted of residential structures.

RMS’ estimate of insured losses differs from the one issued by EQECAT in more ways than just the area, events and days covered. RMS’ estimate does not include auto insurance losses, which is likely to be a significant figure alone, EQECAT’s estimate does include auto losses. Both include personal, commercial and industrial property losses as well as an element of business interruption.

With RMS setting the lower bound of its insurance industry loss estimate for the Moore tornado at $2 billion, and with auto losses to add to that, it is hard to see how this event will not surpass the Joplin tornadoes $2.4 billion insured loss total once the final numbers are tallied.

At that level, say $2.5 billion insured losses and upwards, the event will not seriously trouble any reinsurers and a good portion of the losses will be retained by insurers. The tornado will trouble some catastrophe bonds in terms of erosion of retained and subordinated layers on certain aggregate cat bonds. Our article from yesterday on the Combine Re Ltd. cat bond and the erosion of some of its first-loss layer protection by the tornadoes is an example of this.

We’ll keep you updated as more information on the insured loss from the Moore tornado event becomes available.

Read our other coverage on the Moore tornado event (most recent first):

– Tornadoes to hit Combine Re cat bonds first-loss layer protection

– EQECAT: $2Bn to $5Bn insured losses from recent tornado events, including Oklahoma

– Blue Capital: No material loss expected from Oklahoma tornado

– CATCo: No impact from Oklahoma tornadoes if insured losses below $5 billion

– LGT Insurance-Linked Strategies: No impact expected from Oklahoma tornado

– Insured losses from Moore, Oklahoma tornado could surpass Joplin

– Credit Suisse: losses from Moore tornado under $5 billion, no ILS fund impact

– Oklahoma tornado may cause catastrophe bond price movements

– Moore, Oklahoma City, hit by devastating tornado