Repeat of the 1998 ice storm could generate up to $3 billion in insured losses

Risk Management Solutions (RMS) has 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 US, 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.

Read the RMS report, ‘The 1998 Ice Storm: 10-Year Retrospective’ (PDF)

•Date: 15th January 2008• Region: N.America •Type: Article •Topic: DR general
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