Canadian Underwriter

Five of Canada’s six weather catastrophes in 2015 were out west: CatIQ

February 1, 2016   by Greg Meckbach, Associate Editor

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Canada was hit with six severe-weather catastrophes – causing more than $25 million each in damage – in 2015, with all but one affecting the western part of the country, a catastrophic loss analyst told insurance professionals Monday.

The most expensive event was on July 21, when a severe convective thunderstorm in Alberta caused $260 million in insured losses

“2015 was the year all hail broke loose,” said Carolyn Rennie, director of catastrophic loss analysis for Catastrophe Indices and Quantification Inc. (CatIQ), during the company’s Canadian Catastrophe Conference in Toronto.

CatIQ – a sister company to Toronto-based MSA Research Inc. – tracked six catastrophe events and 10 “notable” events last year, Rennie added. A “notable” event is one with losses between $10 million and $25 million.

The most expensive event was on July 21, when a severe convective thunderstorm in Alberta caused $260 million in insured losses. There was tennis-ball-sized hail and wind gusts up to 110 kilometres per hour, Rennie noted. This caused damage to roof shingles, siding and “extensive auto damage,” she reported.

“Alberta incurred the majority of losses from catastrophes” in 2015, she said. CatIQ has tracked 69 catastrophes since 2008. Between 2008 and 2013, catastrophes – including catastrophic and notable events – caused an average of $1.4 bllion in damage per year on a nominal basis, Rennie said.

Last year’s second most expensive event was when Alberta was hit Aug. 4-5. Golf ball-sized hail affected Calgary. That storm, which had losses estimated at $165 million, had winds near 80 km/h.

The first catastrophe of the year – with total incurred losses estimated at more than $70 million – hit the Prairies June 12, with the “majority of the damage” occurring in Alberta, Rennie said. Wind gusts were up to 119 km/h and some areas were hit with golf ball-sized hail.

On July 22 – the day after 2015’s most expensive severe weather event – a cold front passed through Alberta, with a tornado touching down near Calgary. Overall losses from that storm were estimated at $51 million.

The last catastrophe occurred Aug. 29, when British Columbia was hit with a wind storm, with gusts up to 117 km/h. That storm – which caused about $33 million in damage – caused trees to fall, cutting power to more than 530,000 people.

In Ontario, severe thunderstorms the night of June 22 caused losses estimated at $32 million.

“The majority of the property damage came from the strong winds, but there were reports of isolated flooding in London and Toronto,” Rennie said, adding areas affected stretched from Windsor to Ottawa.

The Canadian Catastrophe Conference, which continues Tuesday, is taking place at the Toronto Region Board of Trade at First Canadian Place, which houses the head office of the Bank of Montreal.

Other speakers Monday included Balz Grollimund, head of earthquake for Swiss Reinsurance Company. Grollimund suggested the experience in Christchurch, New Zealand – which was hit by a series of earthquakes five years ago – provides lessons of use if a major tremor hits British Columbia.

The main quake in Christchurch was 6.3 on the Richter scale, but it hit “the wrong place,” Grollimund said.

The cost of those quakes is now about $36 billion, more than the Northridge earthquake that hit California in 1994, he suggested.

The most expensive earthquakes in history were the 2011 Tohuku tragedy ($54.7 billion) and Northridge ($33.2 billion). Those figures are in Canadian currency, Grollimund said.

Grollimund referred to a report from AIR Worldwide – titled Study of Impact and the Insurance and Economic Cost of a Major Earthquake in British Columbia and Ontario/Québec – in which the company modelled the effects of two hypothetical earthquakes affecting Canada. The report, commissioned by Insurance Bureau of Canada and released in October, 2013, makes detailed predictions of the effects – including economic and insured losses – of a magnitude 9.0 earthquake off the west coast and a magnitude 7.1 quake northeast of Quebec City.

Large parts of suburban Vancouver would be affected by liquefaction – which also affected areas of Christchurch in 2011, said Grollimund.

“That’s the ground underneath the buildings, becoming not solid but liquid,” he said. “If you walk on the beach next to the place where the wave hits the sand and if you step on the sand too hard then your foot sinks in because the sand becomes liquid…that’s what happened here.”

The threat of an earthquake in B.C. should have reinsurers checking policy terms carefully, he said.

“As reinsurers we have always taken the easy way,” he said. “We have said, ‘our clients know what they are doing.’ They of course do, but we also need to understand what these policies look like. What do they cover when claims go really bad? How does that affect the claims process?”