Could a ’98 Ice Storm event happen in this El Nino year?

Heading into an El Nino year, Canadian insurers and reinsurers should be reminded that the 1998 Ice Storm which caused more than $CD1 billion in damage losses in eastern Ontario and Quebec also happened during an El Nino year, panelists told a Swiss Re seminar in Toronto.El Nino refers to the fluctuations of surface water temperatures in the Eastern Pacific Ocean. They are frequently associated with fluctuations in air pressure that can result in hurricanes and other changes in climate.Andrew Castaldi, the head of Swiss Re’s Cat Perils unit, warned that Canada’s insurance industry should be bracing itself for extreme weather phenomena such as the Ice Storm during the upcoming El Nino year. He made the observation at Swiss Re’s seminar, ‘Natural Catastrophes: Managing a Changing Landscape,’ held at the Toronto Board of Trade Downtown Centre. Castaldi also noted that damage costs as a rule tend to double every 10 years. In other words, if a catastrophe like the 1998 Ice Storm were to hit in 2008, a CD$1.2-billion price tag would probably cost CD$2.4 billion instead.As it stands, the industry’s potential legal exposure arising out of the 1998 Ice Storm may already cause the ultimate damage losses of the storm to double, according to Sean Russell, the head of underwriting at Swiss Re Canada.Russell noted the existence of a November 2005 class-action lawsuit in connection with the Ice Storm, in which claimants are seeking additional living expenses of $75 per person, per day. Claimants are also seeking a punitive award of $250 per person. Noting that there were 700,000 claims as a result of the Ice Storm (the largest number of claims for any single event in the world, Russell noted), the class action, if successful, would tack on an additional CD$1.6 billion to the final price tag, Russell said.