Risk Management Solutions Warns of Costly Repeat of 1998 Ice Storm

Risk Management Solutions (RMS) has released a 10-year retrospective report on the 1998 Ice Storm that devastated the Canadian provinces of Ontario and Quebec, as well as portions of the northeastern U.S., in January 1998. RMS notes that “despite the positive advances made in the affected region since that time, a recurrence of the ice storm today would result in total insurance losses of between $1.0 and $3.0 billion,” roughly double the insured losses incurred in1998.

“This storm demonstrates that direct physical damage from a catastrophic event may comprise only a minor percentage of the total insured losses,” explained Robert Muir-Wood, Chief Research Officer at RMS. “Infrastructure disruptions such as power outages lead to costly business interruption losses for commercial and industrial properties, as well as additional living expenses for homeowners forced to evacuate their freezing homes.”

The violent weather between January 4 to 10, 1998, “produced large amounts of freezing rain from northern New York State through the St. Lawrence River Valley region,” said RMS. Up to four inches fell in some areas. Such storms aren’t that unusual, but this series lasted for a weeks, which was unusual. In addition it fell over an immense area, “causing considerable damage, widespread power outages, and 45 fatalities.” RMS said the event “is widely acknowledged to be Canada’s costliest natural disaster and the most severe ice storm to hit the region since at least the 1920s.”

In a “what if” scenario, RMS indicated that, if a similar series of storms occurred in 2008 there would be three main areas of loss: “Direct physical damage to automobile and property, additional living expenses, and refrigerator and freezer contents that may be lost a result of prolonged power outages. Property damage could be expected to be greater than in 1998 due to the increased concentration of buildings in the area.”

RMS also warned that, despite improvements in the “Hydro-Quebec electrical power grid, an ice storm of this magnitude would still cause significant and lengthy power outages.” Residents of the area, however, appear to have taken some measure to prepare for a recurrence. RMS notes that many “homeowners and businesses have purchased generators and non-electrical stoves and heaters to ensure that they would not have to evacuate in the event of a storm and incur additional living expenses or losses to their refrigerator and freezer contents.”

While the 1998 storm was unusual in its duration and violence, “winter storms in North America are frequent events,” said RMS. They cause around “$2 billion of insured losses annually, and with several historical incidences of losses exceeding $2 billion (in today’s values) such as the 1998 Ice Storm, the 1993 Storm of the Century, and the 1983 Freeze Outbreak. As such, winter storm losses form a significant part of the $25 billion average annual loss from wind-related perils in North America.”

Copies of the RMS special report ‘The 1998 Ice Storm: 10-Year Retrospective” will be available free of charge at: www.rms.com

Source: Risk Management Solutions