Nev. Casino Fire Losses Could Have Hit $75 Million, Say Risk Analysts

January 31, 2008

The fire that blazed through the top of the Monte Carlo Hotel in Las Vegas last Friday could have been far more damaging had it started elsewhere in the building and not been contained so quickly, according to analysts at Risk Management Solutions (RMS). In examining the case, RMS said that losses could have reached $75 million if the fire had started in a guest room rather than the roof in a hotel of similar size and layout to the Monte Carlo, where fire sprinklers’ effectiveness is impaired.

“Our risk modeling reveals that an event of this loss magnitude has an annual return period of 600 years,” said Dr. Ajay Singhal, vice president at RMS. “The extent of fire losses heavily depends on the mitigation measures in place. Through detailed analysis, we can calculate the impact of suppression systems like sprinklers as well as fire department response and control times.”

While the blaze was quickly controlled by the local fire department, the scene was reminiscent of the 1980 fire at the MGM Grand Hotel in Las Vegas, which was the second most deadly hotel fire in U.S. history. “Situations like this are a vivid reminder of the potential for low-probability, large-loss events within the realm of fire risk underwriting,” said Mark Rascio, product manager for the RMS fire model. “Popular tourist hotels are particularly susceptible to high business interruption costs caused by fire, as well as building and content losses.”

RMS, founded at Stanford University in 1988, will shortly be launching its new Account Fire Model, which provides metrics for risk managers responsible for properties commonly underwritten by U.S. commercial insurers.

Source: Risk Management Solutions

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