Remembering the 1998 Ice Storm
Ten years ago this month, the Northeast was hit by a treacherous ice storm that ravaged New York, Vermont, New Hampshire, Maine and Canada, causing approximately $200 million in insured losses in the United States. Risk Management Solutions (RMS) recently conducted a study that found if the same ice storm happened today, insured losses could total anywhere from $1 to $3 billion.
Ten years ago this month, the Northeast was hit by a treacherous ice storm that ravaged New York, Vermont, New Hampshire, Maine and Canada, causing approximately $200 million in insured losses in the United States.
Risk Management Solutions (RMS) recently conducted a study that found if the same ice storm happened today, insured losses could total anywhere from $1 to $3 billion.
“Nearly 800,000 insurance claims were filed in Canada with another 140,000 in the United States, causing a total insured loss at the time of $1.3 billion across both countries,” the report said of the 1998 storm. “The event also triggered a class action lawsuit against a group of Canadian insurers for additional living expenses (ALE) due to evacuation as a result of power outages.”
At the time, former President Bill Clinton declared 15 Maine counties disaster areas, and many insurers temporarily suspended cancellation for nonpayment of homeowners, personal auto and business property-casualty policies as more than 50,000 claims poured in from Maine alone (see The Standard, May 1, 1998).
“It was the largest loss that we had ever had and we have ever had,” Larry Shaw, chief executive officer of Maine Mutual Group, told The Standard. “It was a real big deal for us. We had our claims people in here working a lot of overtime. It really was a company effort to work our way through that and put people back on their feet short term.”
Thomas J. Tierney, president of Vermont Mutual Group, said that his policyholders in rural areas were hit hard by the storm.
“When you live in northern New England you need to be prepared for winter,” he told The Standard. “During that particular ice storm, it was just devastating from the aspect of our outages.”
Linda D. Rice, an agent at McCrillis & Eldredge Insurance Agency in Newport, N.H., and a director for the Professional Insurance Agents of New Hampshire (PIANH), told The Standard she remembers the large volume of calls pouring in after the storm.
“It was crazy,” she said. “The town that our office was in was actually shut down, so we had to get clearance to get into work.”
Forty-five deaths were attributed to the storm, and the dairy, timber and maple syrup industries suffered substantial losses that were excluded from coverage.
When trending costs for a future ice storm in the same area, RMS found that while some damage would be mitigated due to consequences of the 1998 storm, property damage losses would most likely be about the same or higher due to rising property values in the Northeast.
“A repeat of the event would lead to similar levels of damage to trees and the vulnerability of lightweight infrastructure in the region has not changed significantly since 1998,” RMS noted. “Therefore, property damage can be expected to scale according to the greater concentration of properties and values in the affected area.”
Shaw said that while steps have been taken to some extent since the 1998 ice storm, he is not convinced the area could avoid comparable damage from similar storms in the future.
“I think some steps have been taken,” he said. “Probably the biggest impact was just the general education of the homeowner. Having lived through that everyone knows the importance of having a generator and keeping the furnace on, or draining your pipes to avoid significant loss that way. I’m not convinced that any major construction progress has been made that would assist this way. I don’t believe the utilities have done anything in a major way.”
Rice said the biggest cause for claims at her agency during the 1998 ice storm was food spoilage. She said that while she has no doubt a similar storm today would result in more damage, it is hard to predict how much because it is difficult to predict storm severity.
RMS also said that as the 1998 ice storm fades from policyholder memories, Northeast residents are less likely to be prepared with backup generators and power sources.
“As years pass and the collective memory of the 1998 ice storm fades, a decreasing proportion of households will have invested in and maintained all the necessary secondary power and heating equipment to survive for many days without electricity,” RMS noted.
Shaw said the biggest lesson to take from the ice storm is to remember that storms of this scale can happen.
“We all, as homeowners, should always be thinking about that and realizing that there are steps to be taken,” he said. “I think the biggest issue from that ice storm was the value of generators. We had neighborhoods that were passing them around. With a power outage in the dead of winter in northern New England the biggest minimizer was that.”
Rice agreed that the most important thing is to be prepared. “You need to have common sense,” she said. “And be sure to think about things like, ‘How do I take care of myself if I can’t go anywhere?’”
Tierney said it is important to be prepared and always assume the worst – especially in northern New England.
“The better prepared you are before the storm you’ll find that it’s easy to weather it,” he said. “When you write business in northern New England, you’ve got to expect that you’re going to get an ice storm every now and then. When that happens, you want to make sure you’re standing by your policyholders.”
RMS said that communities are often not prepared for a storm of such large magnitude. “While changes have been made to the electricity supply infrastructure, as well as to disaster management procedures in the areas directly affected by the 1998 ice storm, in other regions prone to intense ice storms, the level of preparedness today would be little different than that which prevailed in 1998,” RMS commented. “The 1998 event surprised insurers and reinsurers with the magnitude of losses that could be associated with a winter storm in this region. Increases in the numbers and values of properties across the northern parts of the United States and southern Canada can be expected to bring far larger winter storm losses in the future.”
Tierney said that during the 1998 storm policyholder safety took priority over any claims issues.
“The priority was making sure the policyholders were taken care of, or if they had to be evacuated there was a shelter to go to,” he said. “Safety came first and the building came second.”
While the storm was a tragic event for northern New England residents and the insurance community, Shaw said he was proud of how efficiently the industry responded and served the needs of policyholders.
“I am proud of how the insurance industry responded in the ice storm,” he said. “That’s what I remember. We all moved quite aggressively to help in a multitude of ways. The agents did it as well. That’s what I recall. It was our chance to shine and show policyholders what we can do.”