Canadian Underwriter

Cataclysmic hailstorm could cause up to $13.5 billion in damage: ICLR report

February 14, 2018   by David Gambrill

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In a low-probability, worst case scenario, a single major hailstorm in Canada could result in insurance claims of up to $13.5 billion, according to a new research paper from the Institute for Catastrophic Loss Reduction (ICLR).

“Of concern is that hail may become a greater issue in the future due to climate change, potentially increasing the frequency of severe thunderstorms and urban development increasing exposure,” says the February 2018 report, entitled Hail Climatology for Canada: An Update.

The research paper will be released in tandem with an ICLR Friday Forum webinar on February 15. Held between 1 p.m. and 2:30 p.m., the webinar features the author of the paper, David Etkin, who will discuss the findings of his study on recent hail trends in Canada.

Etkin is the associate professor of disaster and emergency management at York University. He joined York University in 2005 after 28 years at Environment Canada.

Hail days in Alberta are on the rise, the report states, unlike in Ontario, where hail days between 1977 and 2006 showed a slightly downwards trend. But there is a large variability of hail storms year-over-year, the report cautions. Hail storms have a “fat-tailed distribution,” meaning that “very rare extreme events account for a relatively large fraction of total impacts.”

The ICLR’s report observes that Canada’s insurance industry had more or less put hail research on the backburner after very few hail events between 1991 and 2008.

“Indeed, there was a period of almost ten years when the Institute received virtually no requests from member companies to study the peril,” the report notes. “The industry directed ICLR to focus its research on other hazards, including the alarming increase in water damage.”

But three major hail events in Alberta (in 2010, 2012 and 2014) brought hailstorms back to the forefront in 2015. Insurers asked ICLR to take another look at the hail peril after collectively paying a total of more than $1.6 billion for the insured losses due to the three Alberta storms.

Research produced for ICLR by AIR Worldwide suggests that “a low probability/worst case storm event could result in insurance damage claims of up to $13.5 billion from a single hail event,” the report says.