On May 31, 1985, a deadly tornado outbreak struck the Northeastern United States and Canada, causing widespread property damage and loss of life.
Thirteen tornadoes struck Central Ontario and impacted communities such as Barrie, Grand Valley, Orangeville and Tottenham. Two of these 13 tornadoes were rated F4, indicating extremely powerful wind speeds:
- The Barrie tornado (#6 in the map), an F4, was most destructive of all in terms of loss of life and property damage. With a track 300 to 450 meters wide and 10 to 15 kilometers long, it killed eight people and caused approximately $100 million CAD in property damage.
- At the same time, the Grand Valley tornado (#7 in the map) began near Arthur and moved east to Campbellford. Traveling over 115 kilometers, it was considered one of the longest tracked tornadoes in Canada.
Tornado monitoring, warning systems and building construction standards in Canada have improved over the past 30 years. But tornado risk to Canadian property still exists. Based on Environment Canada’s 1980-2009 tornado dataset, Ontario experienced an average of 13 tornadoes (confirmed and probable) per year, and significant tornado risk also exists in other areas including Edmonton, Winnipeg, and Montreal.
Increases in population and property exposure since 1985 would mean greater property loss if a similar event were to occur today.
So how can insurance companies manage their Canadian tornado risk?
Deterministic methods and “what-if” scenario loss modeling can help quantify loss potential. Studies performed by David A. Etkin, et. al. in 2002 and Patrick McCarthy, et. al. 2006 demonstrated the value of using “what-if” deterministic loss analysis for hypothetical tornado events in Barrie, ON and Winnipeg, MB respectively. Insurance companies writing property exposure in tornado risk areas may find these and similar scenarios useful as they seek to effectively manage severe thunderstorm risk.
A systematic way of developing numerous “what-if” scenario events across several communities specific to an insured property portfolio can be a valuable tool for companies wiring severe thunderstorm risks. A tool like this can provide flexibility to derive users to define custom-built hypothetical tornado events that are capable of causing large loss potential to insurance portfolios.
For example, “what-if” analysis estimates that a storm like the 1985 Barrie F4 tornado could cause $400 to $600 million CAD in insurance industry loss today. More dramatically, a similar F4 tornado could produce $1.0 to $2.5 billion CAD if it were to occur in Vaughan or Richmond Hills.
Knowing the possibilities makes it easier to price, to plan, and to prepare.