1998 Ice Storm event would cause fewer claims today, taking mitigation efforts into account: RMS

Improvements to underwriting and infrastructure would likely reduce the overall insured loss if an ice storm similar in scale to the 1998 Ice Storm happened today, said Matthew Nielsen, senior product marketing manager of natural catastrophe and portfolio solutions at RMS.
Nielsen spoke at the RMS Canadian Catastrophe Model seminar in Toronto on May 24, 2011.
He described the 1998 Ice Storm as an event that defined the winter storm peril in the Canadian marketplace. The infamous storm resulted in 800,000 claims, totalling $1.6 billion in insured losses (in 1998 dollars).
A massive power outage in some areas that lasted for several weeks, frozen plumbing, downed trees and business interruption exacerbated the loss, Nielsen said.
“But, what was most interesting was looking at residential losses,” he said. “Food spoilage accounted for more than 50% of residential losses. Since then, we have learned a lot.”
In the 13 years since the storm, major improvements and redundancies have been introduced to Montreal’s power network to reduce business interruption and additional living expenses costs. In residential lines, exclusions and deductibles have been introduced for freezer contents, he said.
If the 1998 event were to repeat itself today, under the exact same conditions and without the improvements made, it would likely cost insurers between $3 billion and $3.5 billion (corresponding with a 150-175 year return period), he said. But the improvements and changes made over the past 13 years would reduce that damage total to $2 billion, corresponding with a 75-100 year return period.
“With this type of mitigation you can put a number on it, looking at this type of model output,” he said. “We are reflecting the fact that those changes have been made and that this event won’t play out the same way it did before.”