For now, rating agency AM Best believes that property/casualty insurers will be able to absorb losses from the recent outbreak of 30-plus tornadoes across five U.S. states, but coexisting economic challenges could worsen the picture.

“This outbreak occurred in the midst of significant challenges related to the supply chain and rising costs owing to inflationary pressures,” AM Best said in a commentary released late Monday.

Although AM Best analysts have described the tornado outbreak as “an earnings event” for most insurers, given their robust capitalization and risk management techniques, inflation may amplify losses and supply chain challenges could produce demand surge, the report said.

In addition, the report noted that the growing number of severe weather events generally will prompt reinsurers to re-examine the pricing and supply of aggregate reinsurance protection.

Citing information from NOAA, the Best reported said there already had been 1,174 tornadoes before December 2021 compared to 1,075 in 2020.

While AM Best expects most of the tornado losses to be limited to primary insurers, insurers will want to review their reinsurance protection in light of the growing frequency of tornadoes. At the same time, reinsurers are becoming more cautious as they look at demand and risk, which may be reflected through pricing, limits, deductibles and other underwriting tools, the report said.

The report includes a chart showing the top 10 insurers based on direct written premium volume in the commercial multiperil, homeowners and auto physical damage lines in the state of Kentucky—one of the states impacted by the outbreak. Together the 10 insurers, led by State Farm and Kentucky Farm Bureau Mutual, share roughly 74 percent of the market. “The Kentucky insurance market is not concentrated, and losses may be spread out among insurers,” the report says.