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CANADA | JANUARY 26, 1998 VOL. 151 NO. 3 |
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Closed For Repairs The ice may melt, but a flood of insurance claims and a chain of disrupted commerce will cost Canada more than $1 billion By ANDREW PURVIS
Those estimates, moreover, could grow in weeks ahead as workers still struggle to return power to hundreds of thousands of clients south of the St. Lawrence. Many victims have not even had the chance to survey the damage, let alone submit claims for losses ranging from smashed windshields to frozen livestock. Rejane Legault of AXA Assurances Inc., one of Quebec's largest insurers, reports that her company has received 10,000 filings so far. "Every consumer is touched in some way," she says. Worst hit is the Hydro-Quebec utility, which by week's end was estimated to have sustained $350 million in damages and lost revenue. In addition to the replacement costs for new lines, steel pylons and wooden poles, the agency must find ways to pay 1,150 workers brought in from outside the province, as well as to pay for any future preventive measures, such as burying some cables under urban centers. Since the utility is not insured, it can kiss goodbye much of the $647 million in earnings that had been projected for this year. Half of those profits would have gone to the provincial government, which may now have to wait a little longer before its fiscal deficit is erased. Unlike the Manitoba or Saguenay floods, this storm afflicted one of the most densely populated areas in Canada. At one point, fully 40% of Quebec's 7 million residents were without power. "It's not that there will be huge claims," says Insurance Bureau of Canada spokesman Robert Tremblay, "but that there will be so many of them." The most common filing so far has been for spoiled food; other claims include broken heating pipes, flooded cellars and damaged rooftops. Because of the sheer volume of claims, insurers are accepting most of them at face value. But not all: a Montreal man claimed to have lost 13 turkeys when his freezer blinked off. "We will investigate," assures an executive at the Belair Insurance Co. Business losses appear to be huge. In Quebec the worst power outages occurred across an area that includes 60% of the province's manufacturers. Gerald Ponton, president of Quebec's Alliance of Manufacturers and Exporters, says the storm cost his members up to $70 million a day in lost production. Even those few plants that have come back on line may take weeks to return to full capacity. Alcan Aluminum's strategically critical smelter in Beauharnois got power back in the middle of last week, but the plant won't be fully operational until mid-February. Nearly one-third of Quebec's 36,000 farms were still without power late last week. Dairy cows developed infections after their electric milkers failed (some had to be put down), and thousands of gallons of their milk spoiled for lack of processing. Chickens froze to death as barn temperatures plummeted. Maple forests in southern Quebec, Ontario and the northeastern U.S., which together produce 90% of the world's maple syrup, were destroyed. "Broken completely" is how Laurent Pellerin, president of Quebec's Agricultural Producers' Union, describes the maple trees he saw. "You can't fix it." Some economists, including Yves St. Maurice of the Mouvement des Caisses Desjardins, Quebec's largest financial institution, predict that the storm may slow economic activity throughout the year as workers make up for lost wages by reducing spending. Marcel Cote, of Montreal's SECOR consulting firm, estimates that the storm will reduce Quebec's 3% projected growth rate by as much as a tenth. The good news is that for those individuals and businesses not covered by insurance, the provincial and federal governments have pledged to provide compensation--eventually. And while premiums will rise as a result of the storm, insurance companies may find it in their interest to help Canada's power suppliers develop new preventive measures, as they did in Alberta, where they ponied up funds to pay for hail suppression after the 1991 storm. Shoring up eastern Canada's power grid may not prove so simple. But if the choice is that or another record loss, it seems worth a try. --Reported by Linda Gyulai /Montreal |
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easured in terms of natural disasters, the '90s have been more
costly than any other decade in Canada's history. The Calgary
hailstorm of 1991, the Saguenay floods of 1996 and last year's
Manitoba deluge left a trail of bills totaling $420 million,
$490 million and $300 million, respectively. But the Freeze of
'98 promises to be the granddaddy of them all. Insurance claims
alone have been pegged at $490 million. Overall losses,
economists predict, could exceed $1.25 billion.