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Repeat of the 1998 Ice Storm Could Generate Up to
$3 Billion in Insured Losses Newark, CA – January
10, 2008 – Risk Management Solutions (RMS), the world’s leading
provider of products and services for catastrophe risk management, today
released a 10-year retrospective report on the 1998 Ice Storm that
devastated the Canadian provinces of Ontario and Québec, as well as
portions of the northeastern U.S., in January 1998. 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 — potentially over twice the $1.3 billion cost
incurred in 1998.
“This storm demonstrates that direct physical damage
from a catastrophic event may comprise only a minor percentage of the
total insured losses,” said 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.”
From January 4 to 10, 1998, a series of storms
produced large amounts of freezing rain from northern New York State
through the St. Lawrence River Valley region, with some locations
receiving close to 4 inches. Although freezing rain is not uncommon in
these regions during the winter months, the 1998 Ice Storm was unique in
its long duration, large geographical extent, and extraordinary freezing
rain precipitation totals. Causing considerable damage, widespread power
outages, and 45 fatalities, 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.
Potential insured losses from a 2008 recurrence of
the storm fall into three categories: 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.
Although major improvements have been made to the
Hydro-Quebec electrical power grid, an ice storm of this magnitude would
still cause significant and lengthy power outages. However, since 1998
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.
Winter storms in North America are frequent events,
causing nearly $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.
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