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North America winter storm, blizzards & freeze has billion dollar loss potential

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The ongoing extreme cold, blizzards and severe winter storm weather that has impacted much of the United States, Canada and even stretched down to northern Mexico, is expected to be a costly event in insurance terms, given the significant footprint of the polar weather event.

winter-storm-weather-blizzardThe severe winter weather has caused at least 60 deaths over the last few days, with more expected to be reported as access to areas affected by blizzards and heavy snow returns.

Thousands of flights were cancelled across the US, while hundreds of thousands were without power at times due to blackouts caused by the storm.

Parts of the United States right down to Texas experienced extreme cold as a polar vortex type event dragged arctic air south, while a winter storm named Elliott developed and brought damaging winds, blizzards and impacts to parts of Canada, central and northern states.

Parts of western New York state were among the hardest hit, with Buffalo seeing a reported 30 deaths after a major blizzard impacted the region.

It’s important to note that the polar vortex, or freezing temperature aspect of this event is not anticipated to have driven the insurance claims seen in the Texas freeze event of early 2021.

While temperatures dropped to near record lows in some southern states, the impacts are expected to be less severe given the forecasts anticipated the levels of cold experienced providing time to prepare, while the duration of the most extreme cold appears to have been less and the event did not reach quite as far south for as long as in 2021, as a result.

That said, the overall impacts and costs of the severe winter weather event is expected to be relatively significant, given the large footprint of the cold and storm, that reached from Canada down as far as northern Mexico.

Reinsurance industry sources of ours say at a minimum the aggregated insurance market loss across all regions affected, including Canada, is likely to reach into the low single-digit billions of US dollars.

It’s far too early for any more accurate estimates of industry losses at this stage, but some sources believe this could be one of the most costly winter weather outbreaks of the last decade.

The Insurance Information Institute, Inc. has collected insurance and reinsurance market loss data related to winter storms, that provides a useful data source for establishing how costly winter storm and severe cold events can be.

At the top of the Insurance Information Institute’s list of US winter weather insured loss events, that uses data sourced from broker Aon, sits the Texas freeze of 2021 at around $15 billion.

That was a particularly extreme polar vortex event and was the costliest insured winter loss event in US history by a margin, with the second most costly being a blizzard event in March 1993 that is estimated to have cost over $4 billion in 2021 dollars.

A more recent winter loss event is the February 2015 winter storms that over a six day period cost over $2 billion at the time, estimated to be an insured loss of over $2.4 billion in 2021 dollars.

A four day period of extreme winter weather and storms in January 2014 is estimated to have cost $1.67 billion at the time, or $1.93 billion in 2021 dollars.

Given the impacts reported in the media over recent days, the significant footprint across the US and Canada and the ongoing nature of the event, with many areas still freezing or under significant snowfalls, it seems possible insured losses reach into the low billions.

Issues with pipe bursts, flooding, roof damage and other cold, freeze and snowfall related effects can add up to relatively significant costs for insurers and sometimes drive reinsurance capital support, particularly from quota share arrangements.

Senior Meteorologist Andrew Siffert, of insurance and reinsurance broker BMS, stated that this event will not repeat the February 2021 industry losses, but should be an event of concern to the insurance industry, given the potential for power-outages during freezing weather, high winds and blizzards, with the potential for burst pipes to be an issue.

There are likely to be more details reports available on this event in the coming weeks, that provide more certainty over the potential for this extreme winter weather to drive a billion dollar loss event.

Update: Catastrophe risk modelling specialists at Karen Clark & Co. estimated the insured losses from Winter Storm Elliott at $5.4 billion, based on impacts across 42 US states.

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