(Un)funny money

Hawaii may have its hurricanes, California has its earthquakes and floods, and Colorado (at least this year) has cumulative snowfalls nearly a mile high. Yet in 2006, the Midwest — not West — won in the unfortunate disaster lottery.

While most of the country tends to consider the coastal areas ripe for potential catastrophes, Midwesterners know all too well the devastating impact of tornadoes, floods, ice, snow, wind and hail storms. And the Insurance Services Office Property Claim Service unit’s data for 2006 soundly proves that even land-locked states are not immune to Mother Nature’s worst.

According to PCS, the states where insurers reported the largest catastrophe losses were Indiana ($1.5 billion), Missouri ($878 million), Tennessee ($873 million), Texas ($688 million) and Kansas ($601 million). The catastrophe losses in those states represented half of the total catastrophe losses in the United States for the entire year, ISO indicated.

Insurers were hard hit. PCS identified 33 catastrophe events in 2006, that together cost an estimated $8.8 billion. While those numbers were down slightly from the previous years, especially with 2005’s Hurricane Katrina, the losses nonetheless amounted to the sixth highest level since 1997. And the frequency of catastrophe events rose last year to its second-highest level in a decade, emphasizing the point that a major disaster does not have to occur before large losses are incurred. Several small events can pilfer from insurers’ pocketbooks just as easily.

PCS estimates that insurers received 2.27 million claims for damage to personal and commercial properties and vehicles in 2006. Personal lines claims accounted for 58 percent of the total, while commercial lines represented 9 percent of the claims, and vehicles represented 33 percent of the claims last year.

The 2006 hurricane season produced only one storm of catastrophic proportions, Tropical Storm Ernesto, which caused close to $250 million in insured property damage. Nevertheless, the last quarter of the year was rough on insurers, with six severe weather events. Extreme weather conditions that included wind, hail, tornadoes and flooding, gave 2006’s fourth quarter the distinction of having the highest amount of insured property damage since 1998. Including two events classified as winter storms because of freezing, snow and ice, total insured property damage for the fourth quarter of 2006 is estimated at $1.19 billion.

While 2006 is long gone, harsh conditions are already sounding a little too familiar. California started 2007 with freezing conditions that wreaked havoc on agriculture. And as Iwrite this, Colorado, again, has closed highways to avoid accidents, thanks to the return of unexpectedly bad wintry weather.

While it’s true Indiana, Missouri, Tennessee, Texas and Kansas were the bottom dogs in 2006, Western states should not take comfort in their warmer conditions just yet. If nothing else, 2006’s figures support the point that devastation and claims losses pull at the purse strings most often in places you don’t expect.