RMS: Ice Storm Repeat Could be Costly

Risk Management Solutions (RMS), a provider of products and services for catastrophe risk management, 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 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, according to RMS (www.rms.com).

From Jan. 4-10, 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.