Heartland Tornado May Become the Costliest in History – How Can We Better Prepare

According to the Insurance Journal, last week’s tornado outbreak could become one of the costliest in US history. On my regular segment on FOX Weather this week we discussed the financial impact of these kinds of events, how firms use sophisticated computer models to measure and anticipate and respond to the damage inflicted by the storms, and how technology is helping us become more resilient.

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Mark Friedlander, Director of Corporate Communications at The Insurance Information Institute, had this to say regarding the recent catastrophe:

“Based on preliminary assessments of the extensive property damage we are seeing across multiple states, this weekend’s tornado outbreak has the potential to be the costliest on record in the U.S”.

Public insurance reps aren’t in the habit of making such bold statements. To determine the total costs of natural disasters, insurers follow a methodical approach:

How Insurers Calculate The Economic Impact of Catastrophic Weather Events

To estimate the cost of devastating weather events like the heartland tornado outbreak, insurance companies work with firms that use sophisticated computer software called ‘catastrophe models’.

In use since the 1980s, these sophisticated models enable insurers and other financial organizations and public agencies to evaluate and manage natural catastrophe risk by simulating extreme events like tornados, hurricanes, earthquakes, and wildfires and estimating their related insurance payouts.

Additionally, many property and casualty insurance companies employ in-house meteorologists that utilize the output of catastrophe models to estimate the costs associated with severe weather before and after the events.

How Much Will The Heartland Tornado Cost Insurers?

It’s too soon to know for sure.

However, there are very early estimates, for example, according to catastrophe modeling firm Karen Clark & Company, the insured loss of the storms could reach $3 billion, while credit rating agency Fitch said insured losses could rise to $5 billion.

That’s quite a spread. 

As the total costs will take weeks or even months to calculate, it’s possible, as noted in the Insurance Journal, the Heartland tornado “has the potential” to be the costliest on record.  

For perspective, the largest insurance payout for a tornado in the US, so far, was $8.5 billion for the Tuscaloosa tornado (based on 2020 dollars), which occurred in April 2011.

The Total Economic Impact?

Measuring the total impact of the tornado outbreak on economic activity requires looking at a wide range of variables, including lost wages and revenue, supply chain disruptions, Christmas season disarray, and many additional factors.

While we still don’t have sufficient credible data yet, it wouldn’t be an exaggeration to estimate the total economic costs of the Heartland tornado to be in the tens of billions of dollars.

Recovery and Resilience

As insurance payouts and government money flow in to build back after these losses, the local economies will revive, and, hopefully, the new infrastructure will be even more resilient, helping the communities better deal with future – and possibly more regular – climate disasters.

This represents a light at the end of what will be, for the local communities, a very large tunnel.

Can We Better Prepare For Future Weather & Climate Events?

“Probably the most remarkable thing is that there’s not a greater loss of life,” Arkansas Gov. Asa Hutchinson said after touring the wreckage of a collapsed nursing home in Monette, AR. “It is catastrophic. It’s a total destruction.”

As a quick backstory — in the early ’90s (yes, I’m that old) I was the Air Force Chief Meteorologist at Ft Campbell, Kentucky. In the meteorology and aviation world, Ft Campbell is known as KHOP.

While there I was part of the team that installed the NEXRAD radar technology that is still powering the data used by the National Weather Service (NWS) and provided to, among others, local government emergency managers, businesses, and media outlets (like FOX Weather).

The KHOP radar was one of the primary technologies used as an input to the warnings issued by the National Weather Service in Kentucky.

I like to think that that technology helped save countless lives in the area and it’s an example of how improvements in technology are directly helping people stay safe.

Of course, the NEXRAD system was developed in the ’80s and deployed in the ’90s  – imagine how much progress has been made on the technology since then.

Meteorologists like Trent Okerson, WPSD’s weather forecaster, don’t get enough credit for the life-saving work they do until catastrophes like these remind us how vital weather and climate forecasting technologies actually are.

Three days prior to the December 10th tornado outbreak, Okerson had started warning Mayfield, Princeton, and Dawson Springs, KY residents a major storm was coming. Hours before the storm, Okerson predicted the exact time the tornado would arrive and the precise path it would take, warning viewers that this extreme weather event would soon become incredibly violent. (Detailed breakdown of Okerson’s leadup and live coverage of the tornado swarm here)

And imagine what’s next.

BreezoMeter and others in the climate tech space are accelerating efforts to create real-time digital resilience aimed at improving people’s health and welfare.

Leveraging technology to create what we call environmental intelligence is a key and real-time sustainability solution and it’s why, at BreezoMeter, we come to work every day.

And oh by the way – we’re hiring!

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Paul Walsh

Previously at IBM and The Weather Company, I have decades of experience in helping large consumer businesses re-imagine how they systemically leverage weather and climate data in both supply and demand chain systems -- creating integrated enterprise processes that are more responsive and more resilient in the face of increasingly impactful weather conditions. My observations have been featured in the US on The Weather Channel and CNBC, & I've been quoted in The Wall Street Journal, Barron’s, and The New York Times. Connect with me!