Travelers Cos. Inc. says it will pay at least $1 billion in insurance claims and suffer a second-quarter operating loss from tornadoes and hailstorms that pummeled 13 midwestern and southern states in April and May.
Allstate Corp. reported similar catastrophe losses. The two property insurers set the tone for what is expected to be a brutal year for the property insurance industry -- the worst since 2005 when Hurricane Katrina struck the Gulf Coast.
And this tally does not include the recent tornadoes that sliced through Massachusetts, as well.
Travelers, based in New York with key operations in Hartford, Conn., and St. Paul, Minn. said spring storms damaged businesses and residential property.
An unprecedented number of twisters rained terror and destruction on Joplin, Mo., north Minneapolis, Kansas, Alabama and other places. The insurance industry reported more than 1,400 tornadoes for the first five months of 2011. The storms caused 515 deaths and billions of dollars in insured property damage.
Risk modeling firm AIR Worldwide forecast that the twisters and thunderstorms will cost insurers $4 billion to $7 billion.
Another firm, EQECAT Catastrophe Risk Modeling, forecast that the tornado destruction in Joplin alone could cost insurers $1 billion to $3 billion. That tornado proved the deadliest in recent history, killing 130 people.
Mike Barry, spokesman for the Insurance Information Institute, said those estimates are for just two weeks of storms. "Circling back to 2010, it was $9.5 billion for the whole year," Barry said.
Including non-storm-related claims, the industry doled out more than $13.5 billion last year.
This year's financial hit prompted Travelers to limit its share repurchase program. Travelers bought back $1.1 billion in stock last quarter and $1.4 billion in the second quarter of last year. Now it plans to repurchase less than $250 million in this second quarter and at least $400 million plus net income for the second half of the year.
The company said it was not rushing to cancel its customers' insurance policies, a step taken by a few smaller insurance companies hard hit by storms.
Barry at the Insurance Information Institute said Alfa Mutual, based in Montgomery, Ala., reported that it would not renew about 70,000 policies, mostly in its home state, after the tornado and hailstorm devastation there.
Travelers CEO Jay Fishman said the company's primary concern is for the storm victims.
"We are proud of our catastrophe team's immediate response to these events and their continued dedication to helping those affected," he said.
Aside from the catastrophes, Travelers expects its loss reserves to remain unchanged from a year ago.