Risk Modeler Says Repeat of 1987 Windstorm Could Cost $14 Billion

October 15, 2007

Risk Management Solutions (RMS) has released an impact study of the potential losses from a windstorm of the force and velocity of the one that hit Southern England and Northern France in 1987, if it occurred today.

The storm struck twenty years ago on the 15 and 16 October. If a similar event happened now it “would result in insured losses ranging between £4 billion [$8.166 billion] and £7 billion [$14.29 billion] across Europe,” said RMS. Around 70 percent of the losses would occur in the UK. The estimates are over 2.5 times the £1.4 billion ($2.85 billion) in losses caused by the 1987 storm.

“Not only has inflation pushed up property prices since 1987, but there has been around a 20 percent increase in the number of households in the areas of Britain affected by the storm,” explained Dr. Barbara Page, senior model manager for European windstorm modeling at RMS. “In 1987, approximately 7.5 million households were located in the storm’s destructive path across London, the southeast and east of England, and now this would be over 9 million.” She also noted the growth in “commercial property and infrastructure investment in the region,” as well as significantly increased construction costs.

Page indicated that, while the science of predicting these kinds of storms has generally improved, “events like the October 1987 windstorm, which was an extra-tropical cyclone with hurricane force winds, remain very difficult to predict.”

RMS said it is “widely acknowledged” that the 1987 storm was “Britain’s most severe since 1703.” However, it could have been far more costly if it had “struck just tens of kilometers to the northwest of its actual path, taking a direct hit on London and the densely populated M4 corridor to the west. In the worst case analysis, losses could reach as much as £9 billion [$18.37 billion] in the U.K. alone.”

In an interesting observation, RMS noted that the areas hit by the 1987 storm could expect a similar occurrence “once every 200 years,” but “the probability of insurers incurring the same level of losses from a storm is once every 35 years.”

RMS said its “analysis shows that less severe but more widespread storms, such as Windstorm Daria in January 1990, can actually cause greater insured damage than powerful but more concentrated events like the 1987 Windstorm.”

Copies of the RMS special report ‘The Great 1987 Windstorm: 20-Year Retrospective’ can be downloaded free of charge at www.rms.com

Source: Risk Management Solutions

Ed Note: One hopes that RMS doesn’t wait until 2009 to issue a similar report on the storms – Lothar and Martin – that struck France, as well as Switzerland and Southern Germany in 1999. The Federation Francaise des Societes d’Assurance (FFSA) announced losses of more than $6.4 billion (See IJ web site May 31, 2000). The editor experienced both of them. 1987 was bad, but Lothar was far worse. Eight years later one still sees mounds of flattened trees, and up until a few years ago people were still repairing their roofs.

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