claims totals for five earlier events had alreadypushed 2013 insured losses to somewhere be-tween $3 billion and $3.5 billion.This puts thecountry in a league with many other westernindustrialized nations that face multi-billion-dollar claims years on a regular basis.

Perhaps somewhat ironically, the late-year icestorm came on the 15th anniversary year of themassive ice storm that ravaged eastern Ontario,the Ottawa/Montreal corridor and parts of theMaritimes — it was not until the floods insouthern Alberta last June that the January ’98 icestorm fell from first to second in the ranking ofcostliest insured Canadian natural catastrophes— and on the tenth anniversary year of thewidespread northeastern blackout in August2003. Once again, several hundred thousandCanadians found themselves without electric-ity, many for as long as five days or more.

The latest storm was exceptional, rare to besure, but not unheard of. And while it had thepotential to be on par with the ’98 event had itcontinued a few days longer, by the end of it, IceStorm 2013 was no fair analog to the Great IceStorm, whether measured by ice accretion, cus-tomers without power, property damage or fatal-ities. Still, it was a significant event.

It looked like Canada’s naturalcatastrophe story for 2013was just about told when theice storm mere days beforethe year’s close added thechapter, “It ain’t over till it’sover.” Some day, there will be another major wind or ice storm, demanding thatdiscussions begin now abouthow much should be spent to guard against what mayamount to fairly rare events.

In what may amount to a “coming-of-age” yearfor Canada, a string of severe weather events —ending with a major ice storm — conspired toensure that Canadian property and casualtyinsurers will pay out more in catastrophe lossesfor 2013 than for any other year — by far.

At writing, preliminary insured losses for IceStorm 2013 were still a few weeks away, but

50 Canadian Underwriter January 2014

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Glenn McGillivray Managing Director, Institute forCatastrophic LossReduction

Opinion/Analysis

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TAKEAWAYSAlthough essentially all hazard eventsoffer a long list of lessons, two themescome out strong in the wake of IceStorm 2013.

First, the ice storm again raised theissue of personal preparedness.The vastmajority of people affected by this eventsimply were not ready for a severeweather event.

The lack of preparedness and overallawareness of what to do prior to, duringand immediately following hazard eventswas evidenced by the many instances ofcarbon monoxide poisoning reportedin the press, caused when people usedunorthodox and dangerous means to heattheir homes during the outages. Despitenagging warnings, few people take stepsto prepare, and this must change.

Second, the event shone a glaringspotlight on the poor condition of thehydroelectric grid, particularly in the

City of Toronto, where the system is old,trees tend to be older and larger, andstreets are narrower. The ice storm, theJuly 8 flood event in the Greater TorontoArea (GTA), and the earlier urban floodevent in southern Alberta warn of soci-ety’s growing vulnerability due to aginginfrastructure.This lends some credenceto the idea that many natural catastro-phes are, in effect, man-made.

Often, in the wake of severe weatherevents, the common mantra heard frompoliticos, public utilities and others isthat the event was “just too big” andnothing could have been done to pre-vent it or lessen its impact. It would bedifficult, however, for Toronto Hydroto use this strategy when the corpora-tion has in the not-so-distant past taken

the rare step of publicly criticizing thepoor state of its own assets and has issueddire warnings about future reliability ofits own service.

The Toronto Star reported on December30, 2011 that unions for Toronto Hydrowarned that “a yet-to-be released rulingby the Ontario Energy Board risks slash-ing Toronto Hydro’s budget for renew-ing its aging system by two-thirds. Andthat, they say, will lead to an increas-

ingly unreliable power system — a con-clusion that Toronto Hydro doesn’t dis-agree with.”

Notes the article, “‘We’re seeing neigh-bourhoods that are getting 12, 18 outagesa year,’ Toronto Hydro vice-presidentBlair Peberdy said… The downtowncore’s system is also aging. Much of it is50 years old, dating back to the start ofthe 1960s construction boom.”

On January 5, 2012, The Star reported

Investing in mitigation alwaysinvolves the question of cost/benefit: How much should be invested to get major stakeholders to a certain risk comfort level?What is realistic and doable?

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52 Canadian Underwriter January 2014

“the Ontario Energy Board has toldToronto Hydro it can see little evidencethat the utility’s state of repair is as badas the utility claims.” The board toldToronto Hydro “to manage its spendingthe same way other utilities in theprovince have done.As a result, it won’tallow the utility to make a special casefor radically higher spending on re-newal and maintenance at a full-blownhearing before the board.”

Two months later, on March 7, 2012,The Star reported thatToronto Hydro wasbeing dropped by its insurer FM Globalat contract renewal June 1.

“Toronto Hydro has been warningthat a decision in January by the OntarioEnergy Board curbing its equipment re-newal program will prevent it from re-placing aging equipment — leading tolonger and more frequent blackouts. Pe-berdy said the prospect of insuring lessreliable equipment seems to have trig-gered the decision by the insurer, Fac-tory Mutual insurance, or FM Global,”the article noted.

BALANCE ESSENTIALToronto Hydro now finds itself in theunenviable position of being criticizedafter the July 8 GTA flood for having toomany underground assets and after the

recent ice storm for not having enough.It must now make some tough deci-

sions. Investing in mitigation always in-volves the question of cost/benefit: Howmuch should be invested to get majorstakeholders to a certain risk comfortlevel? What is realistic and doable?

For the sake of discussion, considerstorm water management. While it istechnically feasible to put a storm sewersystem into Toronto that could handleheavy rain events such as the August 19,2005 and July 8, 2013 storms, the costwould be beyond prohibitive (some es-timate it would require the entire annualGDP of Canada) and the disruption dueto construction would be unlike any-thing ever experienced in the country.

One news report posited it would costabout $2 billion to underground allremaining overhead lines in Toronto,not including other associated costs likeinstalling stand-alone traffic signals. (Aneven more recent article has suggestedthe total is more in line with $15 billion.)

Whatever the total, a 2013 feasibilitystudy entitled Underground overhead wires:Town of Markham: Yonge and Davis Corridors— by Lehman & Associates, DPM Energyand George Todd Consulting with theTown of Newmarket — notes that “thecost of converting an existing overhead

distribution system to an undergroundsystem is relatively high — typically fiveto six times more expensive than therelocation of an above-ground system.”

While even the $15 billion is consid-erably more realistic than the stormsewer upgrade example noted previ-ously, it is substantial nonetheless. So thequestion remains: How much should bespent to bolster the grid for what amountsto be fairly rare damaging wind and icestorm events? And what about an under-ground system that can withstand flood,which likely is not factored into the$15 billion?

As of late, there have been many callsfor senior governments in Canada toinvest in the country’s infrastructure,including storm water systems.While asimilar call must go out for upgrades tothe grid, it is necessary to be smartabout any decisions and choices made.

As with the August 2005 Torontoflood, once an extreme event happens,it is clear it can happen again. WitnessJuly 8, 2013.

One day, there will be another majorice storm in the GTA.

Let the discussion begin.

(Ice accretion in millimetres:December 21-22)

Ice Storm 2013

Trenton 30

Toronto Pearson Airport 24.8

Vaughan 25

Grimsby 27.7

Orillia 3-4

Niagara 27.7

Downsview 20

Niagara Escarpment 7-8

Hamilton 20

Barrie 20

Brampton 20-30

Cornwall 15

Kingston 20

Kitchener 15-20

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