Insured losses in Joplin on track to total $2 billion

JOPLIN, Mo. — The Joplin tornado, the largest insurance event in Missouri history, is still on track to rack up a $2 billion price tag.

As of Oct. 31, losses paid by insurance companies on 19,870 private and commercial claims totaled $1.65 billion.

“We still think it will be in the $2 billion range,” said John M. Huff, director of the Missouri Department of Insurance, Financial Institutions and Professional Registration, in a telephone interview Wednesday.

For 18 months after the May 2011 tornado, Huff said, the department required monthly reporting on the claims submitted and paid by the state’s insurance companies so the department, chief regulator of the industry in Missouri, could accurately assess “the movement in Joplin” to ensure that pending claims were being paid in a timely manner.

That reporting from the companies concluded on Oct. 31, but the department is still monitoring the situation.

“We lasered in on the personal lines to make sure individual consumers were being handled in a timely basis,” Huff said. “That is wrapping up very nicely. For all practical purposes, that is done. If a property owner has an issue that needs to be addressed, they should contact our customer affairs division.”

For residential property, the insurance companies have responded to 8,647 claims and paid out $535.7 million. That amount reflects how much insurance money, in total, will be available to rebuild and repair damaged homes in connection with the Joplin tornado.

For private auto coverage, the companies have responded to 6,982 claims and paid $47.9 million.

Those totals reflect figures as of Oct. 31.

The $535.7 million paid for losses connected to residential property has helped fund the construction of new houses at a steady rate in Joplin and the area since the tornado, said Crystal Harrington, director of the Home Builders Association of Southwest Missouri.

“It’s been steady, but there’s still a significant number of permits being issued to charities and not-for-profits,” she said. “For every two houses built by marketplace builders, one is built by a charity or not-for-profit group, such as Samaritan’s Purse or Habitat for Humanity. It’s steady, but not booming.”

She said some people who have received settlements from their insurance companies for a lost home have been reluctant to rebuild because of uncertainty about the federal “fiscal cliff” negotiations and whether Joplin’s tax increment financing district would be approved.

“Those things have influenced the decision-making process,” she said. “People with residential property along the 20th Street corridor have decided to hang back and see what happens. They will eventually decide to either rebuild or go somewhere else.”

Harrington said builders are constructing new homes in Webb City and Carl Junction, too, and many of them are being occupied by Joplin residents with settlements from their insurance companies.

“A significant number of people have moved to Webb City and Carl Junction,” she said. “Our building boom will come in a year or so when Mercy Hospital Joplin is being finished. We believe a first-rate, high-tech hospital will bring with it a large influx of high-tech jobs to Joplin.”

It is the claims connected to commercial property that eventually will push the total to $2 billion, Huff said.

“They take longer because commercial claims often involve complicated coverage issues and larger individual losses,” he said, noting that commercial claims often are adjudicated for the loss associated with interrupted services.

“We are monitoring those, and they are progressing well,” he said. “The industry response has been commendable, and we are comfortable with where they are.”

As of Oct. 31, for commercial property, the insurance companies have responded to 2,142 claims and paid losses of $986.8 million. Commercial auto and other commercial losses have generated 622 claims and paid losses of $19.4 million.

The Joplin tornado pushed Barton County Mutual Insurance Co. to the brink of insolvency. It had premiums of $32 million in 2011 but reported claims of $48 million related to the tornado.

The company, which was placed under the control of the Missouri Department of Insurance, is now in better financial condition. At the department’s request, a Barton County judge has released the company from the department’s control.

“Keeping the company in business to serve rural Missourians was a top priority for the department,” Huff said. “Through an innovative arrangement with the Missouri Property and Casualty Insurance Guaranty Association, along with significant underwriting and management changes overseen by the department, Barton is now poised for a long and prosperous future.

“This is a win for policyholders, agents, the insurance industry and the city of Liberal, where Barton is the largest employer.”

The insurance company has about 29,000 policyholders.

A member of the town’s Board of Aldermen, who asked that his name not be used, said that after the school district, Barton Mutual is the largest employer in Liberal, which had a population of 759 in 2010.

The situation involving Barton Mutual led to the passage of new legislation in Missouri, effective Jan. 1.

“The reinsurance requirements that took effect on Jan. 1 mean that there will never be another single event that causes that much shock to one of the companies,” Huff said. “A company can no longer lose more than 20 percent of their surplus or shareholder equity. They have to have reinsurance to cover that.”

The new legislation affected 83 county mutual agencies in Missouri, according to a department spokesman. Those companies had 1,477 tornado claims totaling $61.8 million. JoplinGlobe