Overview
A tornado with wind speeds reaching 170 mph struck a central Kentucky city in mid-May. This event added to the rising number of severe weather incidents in the state, where secondary perils have led to rapid underwriting changes following deteriorating combined ratios, according to BestWire.
Each of the top 20 homeowners insurers in Kentucky recorded combined ratios above 119.
According to Gallagher Re Chief Science Officer Steve Bowen, while the total number of severe weather outbreaks hasn’t increased significantly, the intensity of events per outbreak — including tornadoes, hail, and damaging winds — has grown.
Escalating Weather Events and Their Impact on Insurers
In March, hailstones at least two inches in diameter hit multiple Kentucky communities. Weeks later, a major tornado impacted metro Louisville, and flooding from the Kentucky River damaged property in Frankfort, including the Buffalo Trace distillery.
Increased heat and atmospheric moisture, especially from the Gulf of Mexico, can destabilize weather patterns.
However, Gallagher Re cautioned against attributing all events solely to climate change. Primary insurers have varying levels of exposure to climate risk, with the property and casualty insurance markets in the US and Japan identified as the most sensitive to an increase in natural catastrophe claims.
Analysts conducted a country-level analysis on the potential impact of climate change on insurers, focusing on a 10-year average of insured natural catastrophe claims and their effects on underwriting profitability.
In 2023, for the fourth year in a row, global insured catastrophe losses exceeded $100 bn. The trend continues this year: In the first half, losses have reached $62 bn and are tracking well above the 10-year average of $37 bn.
Ordinarily this shouldn’t trouble primary insurers, which can offset some of that risk by buying reinsurance (see Top Risk in Insurance).
But it’s getting harder for them to do so. In a world of climate change, inflation and growing property exposure, reinsurers have ramped up their prices and are demanding more favorable terms, such as raising the level at which a policy will pay out.
Deteriorating Combined Ratios and Market Strain
In 2019, only three of the top 20 homeowners insurers in Kentucky had combined ratios over 100. By 2021, that number had increased to 16. In 2023, only State Farm Group (92.42) and Travelers Group (90.65) stayed below 100 among the ten largest homeowners multiperil writers.
Insurers continue to raise rates in response. Kentucky Farm Bureau Mutual Insurance Co. received approval for a 14% homeowners rate increase.
The group, which had three years of net losses including a $255,141 deficit in 2023, reported $1,617 in net income last year. Its net premiums written rose 16.4% in 2024 to $1.55 mn.
Since November 1, 121 homeowners multiperil rate filings have been approved in Kentucky.
Most hikes were in the double digits:
- State Farm Fire and Casualty Co. (15%),
- Nationwide Mutual (15.2%),
- Erie Insurance (19.7%),
- and Homesite Insurance Co. of the Midwest (23.6%).
Other insurers receiving similar approvals included Allstate, Liberty Mutual, Chubb, Travelers, Encova, Amica, CSAA, and Shelter Armed Forces Insurance Exchange.
Insurers must now account for global economic factors and indirect replacement costs, including the possible effect of new U.S. tariffs. Rising claim costs are a growing concern.
Steve Bowen, Gallagher Re Chief Science Officer
Insurance Information Institute Chief Insurance Officer Dale Porfilio said insurers are being hit by severe convective storms in previously low-risk regions.
A recent Best’s Report called for more stress testing, highlighting that secondary perils now contribute significantly to property/casualty losses.
The report also stated that single-state and regional insurers in Kentucky, Tennessee, Louisiana, and Wyoming had the highest percentage of direct losses paid compared to premiums written, reflecting elevated concentration risk.
Insurers are now improving catastrophe exposure management, increasing rates, limiting new business, and adjusting pricing models.
Geographic risk shifts have made enterprise risk management more critical.
Rate Increases and Regulatory Response
Losses from tornadoes, wind, and hail have expanded beyond traditional Tornado Alley into broader parts of the Midwest and Southeast. Bowen described the impact of storms influenced by Gulf moisture as similar to a “firehose” striking inland communities.
Population growth in vulnerable regions and the expansion of urban areas have worsened loss trends.
Severe convective storms a primary peril, noting that $15 bn in annual losses was rare a decade ago, while the past nine years have seen eight years above $20 bn. Losses in 2025 could reach $30 bn.
Insurance fraud risks have also grown. Chris Nolan, a lobbyist for the Insurance Institute of Kentucky, said rising weather losses have opened more chances for fraud.
In response, state lawmakers passed a law expanding the definition of property/casualty fraud to include contractors and adjusters charging unnecessary or inflated fees.
Matt Overturf of the National Association of Mutual Insurance Companies said insurers must address inflation, weather volatility, and legal challenges.
He emphasized the importance of close cooperation with regulators to maintain market stability. Overturf added that Kentucky’s best strategy remains building a regulatory climate that attracts new capital to the state’s insurance market.
Kentucky policymakers know the best way to deal with these challenges is to create a regulatory environment that encourages new insurance capital into the state’s insurance marketplace
Matt Overturf of the National Association of Mutual Insurance Companies
The five largest homeowners multiperil insurers in Kentucky by direct premiums written were: State Farm Group (22.95%), Kentucky Farm Bureau Group (21.85%), Liberty Mutual (10.59%), Allstate (6.73%), and USAA (5.33%).
About Kentucky Storms
In May 2025, Kentucky experienced a series of severe weather events, including multiple tornadoes, resulting in significant damage and loss of life.
On May 16, a powerful EF4 tornado with peak winds of 170 mph struck the cities of Somerset and London in southern Kentucky. The tornado remained on the ground for nearly 90 minutes, carving a 59.95-mile path through Russell, Pulaski, and Laurel counties.
It destroyed numerous homes, including the Sunshine Hills subdivision and the Sunshine Hills Baptist Church, and caused extensive damage to the London-Corbin Airport, where several aircraft and hangars were destroyed. The tornado resulted in 19 fatalities and at least 10 injuries.
Earlier, on May 15, another tornado outbreak affected parts of Kentucky, including an EF3 tornado that caused significant damage in the Morganfield area.
These events were part of a larger system that produced 56 tornadoes across the Midwestern and Southeastern United States over two days, leading to 27 tornado-related deaths.
In addition to tornadoes, the state faced other severe weather challenges.
On May 30, an EF1 tornado struck Washington County, destroying homes and injuring several people. Throughout the month, heavy rainfall led to widespread flooding, particularly in Frankfort, where the Kentucky River overflowed, inundating historic homes and businesses.
These severe weather events have prompted discussions about the increasing frequency and intensity of such phenomena in Kentucky, with experts noting a shift in tornado activity patterns and the need for enhanced preparedness and infrastructure resilience.
FAQ
Rates are increasing due to elevated losses from tornadoes, hail, and severe storms. In 2023, all top 20 homeowners insurers in the state had combined ratios above 119, prompting carriers to file for double-digit rate hikes.
Recent events include a 170 mph tornado in May, large hail in March, a damaging tornado in Louisville, and flooding in Frankfort. These events have increased claim volumes and costs.
The top 5 by market share were: State Farm Group (22.95%), Kentucky Farm Bureau Group (21.85%), Liberty Mutual (10.59%), Allstate (6.73%), and USAA (5.33%).
Carriers are increasing rates, limiting new business, improving catastrophe exposure management, and adjusting pricing models. Many are also enhancing their risk management strategies.
Secondary perils refer to hazards like hail, wind, and tornadoes that traditionally caused less concern than primary perils like hurricanes. However, losses from these events now routinely exceed $20 bn annually, prompting experts to treat them as primary threats.
Yes. Single-state and regional insurers in Kentucky and similar states bear a greater share of claims relative to premiums, increasing their financial risk due to concentrated exposure.
The state passed a law expanding the definition of property/casualty fraud to include contractors and public adjusters charging inflated or unnecessary fees, aiming to protect policyholders during disaster recovery.
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QUOTES: Steve Bowen – Gallagher Re Chief Science Officer, Dale Porfilio – Insurance Information Institute Chief Insurance Officer, Chris Nolan – a lobbyist for the Insurance Institute of Kentucky, Matt Overturf of the National Association of Mutual Insurance Companies
