Storm Watch

Insured losses from Sandy-related severe weather could hit $100 million for Ontario and Quebec alone, with insurance companies reporting a combination of wind and water damage along with some business continuity claims.

Based on information from Property Claim Services Canada (PCS-Canada), the Insurance Bureau of Canada (IBC) released the preliminary estimate on November 28. The thousands of claims are for damage to homes, cars and businesses in parts of Ontario and Quebec (the late-October storm then headed into Atlantic Canada). IBC says PCS-Canada is expected to re-survey insurers for an update, likely toward the end of January.

When the storm moved into Canada, strong winds caused multiple power failures, leaving more than 150,000 people without electricity. There were also two deaths in Canada in Sandy’s wake, including a woman in Toronto who died after a store sign fell on her. 

LOSSES MANAGEABLE

Despite the damage and losses, the storm’s effects were not as bad as some initially feared.

“The power outages were not as significant as they were in Quebec during the (1998) ice storm,” reports Richard Zamperin, director of claims for Allstate Insurance Company of Canada in Markham, Ontario. “It was not as devastating as it could have been. We really did prepare for the absolute worst, but took a little bit of heart in the fact that it wasn’t as big or as bad as we originally thought it might be,” Zamperin says.

Hurricane Sandy was downgraded to post-tropical storm status when it made landfall in New Jersey on October 29, but still caused major damage south of the border.

Zamperin describes claims received by Allstate Canada as a “mixed bag” of wind, water and wind-driven water.

The Dominion, based in Toronto, had a similar claims experience. Joanne Carmody, assistant vice president of claims operations for The Dominion, says reported claims were for wind damage, with some associated rain damage.

Some policyholders with comprehensive auto policies reported that trees had fallen on their vehicles while others reported damaged vehicle hinges when opened vehicle doors were overextended by the storm’s strong winds.

Toronto-based RSA Canada also received claims relating to vehicle damage, says claims relationship manager Alex Walker. “Debris will get picked up or tree limbs will come down and they will strike people’s cars,” Walker says. “Of course, if a customer doesn’t have an all-perils or comprehensive coverage on their car, they sometimes might find themselves in a coverage-gap situation.”

Information from IBC defines comprehensive, or all-perils auto, as coverage within an automobile physical damage policy to insure against loss or damage resulting from miscellaneous causes such as fire, theft, windstorm, flood and vandalism, but normally not including loss by collision or upset.

Beyond vehicle claims, Walker says that RSA Canada also received those for damage to roofs, fences and outdoor structures. “Usually, it’s damage caused by the wind to a roof or flashing around your windows, and the wind is just pounding the rain against the house and it actually comes in. We had some commercial losses like that,” he points out.

BY THE MAP

Approximately 90% of RSA Canada’s claims originated in Ontario, Walker says, adding that these were concentrated in and around Sarnia in the southwestern part of the province. “We did get some claims in Quebec and a small amount in Atlantic Canada,” he adds.

For The Dominion’s claims in Ontario, Carmody says, there was damage to various parts of the province, in areas such as Sarnia and Windsor. “The storm damage, from what we’ve had in terms of claims reported, does essentially follow the (Highway) 401 right across the province,” she writes in an email.

As of early December, The Co-operators Group Ltd. in Guelph, Ontario reported having settled about 65% of its claims, Leonard Sharman, the company’s senior advisor for media relations, notes in an email. “We had approximately 680 home claims, 90 farm and commercial, and 65 auto claims reported as a result of the storm,” Sharman writes. “Almost 90% of the claims were for wind damage, with a handful from water damage from sewer back-up or seepage.”

He says “the total cost is a little less than $5 million, making it the second biggest storm in Ontario for us this year, behind the storm of July 23, and it’s much smaller than the hail storms that hit Alberta in July and August.”

IBC previously reported the wind, rain and hail storms that pummeled Calgary and surrounding areas during August caused insured damages of more than $500 million. Overall in Canada, total insured damage in 2012 has been pegged at about $1.19 billion.

When Sandy blew into Eastern Canada at the tail end of October, IBC reports, “trees were toppled and power lines fell when winds reached 100 km/h. The high winds damaged homes and businesses, ripped shingles off roofs and heavy rains resulted in localized flooding and sewer back-up in some residential basements.”

Still, damages in Canada paled in comparison to those in the United States. Looking at Sandy’s big picture, a number of insurers released loss estimates, all of which were subject to change. American International Group Inc. reports its pre-tax loss estimate, net of reinsurance, will be about US$2 billion; Swiss Re estimates claims from Sandy will be about US$900 million, net of retrocession and before tax; and ACE Group of Companies estimates its preliminary losses in the fourth quarter of 2012 will be US$380 million after tax, net of reinsurance and including reinstatement premiums. 

CLOSED FOR BUSINESS

Losses from the storm will not necessarily be confined to property and auto, ratings agency Fitch Inc. reported the day after Hurricane Sandy made landfall. There may be significant business interruption (BI) and contingent business interruption claims resulting from that system, Fitch predicted at the time. To claim losses under BI policies, an organization must suffer loss of income from suspension of operations.

Some RSA Canada clients submitted BI claims here at home, Walker reports. “In a couple of cases, businesses had their roofs damaged, or some exterior structures were damaged, and that, of course, impacted the business’s ability to carry on and function,” he notes.

“The key there for any insurance company, and not just RSA, is to make sure there is a quick response from the claims department so that you can help that business get back up and running and make sure they can carry on with their normal day-to-day activities,” Walker emphasizes.

As of press time, The Dominion’s Carmody said the company had not received any third-party liability claims.

Liability insurance is defined as that “which agrees to indemnify the insured for sums he may be required by law to pay to third parties as damages for bodily injury or damage to property,” notes information from IBC.

“Typically speaking, liability claims are often reported well after the fact,” Carmody writes. “If there were to be a liability claim reported, often in circumstances like this it would be related to a physical damage claim, such as if we insured a business whose sign was not terribly well-secured and in the wind storm, the sign that should have been able to withstand the force of the wind did not, and had caused damage to somebody else’s property.”

When the storm hit, says Allstate Canada’s Zamperin, employees were on standby and additional staff was deployed to areas affected by the storm. “We had all of our third-party vendors on their regular state of preparedness, making sure the contractors had sta
ff available in the quantities that we thought they might need to get out there and deal with the immediate disaster restoration, that they had the equipment available to get out there,” he adds.