EQE SUMMARY REPORT. The European. Storms Lothar. and Martin, December 26-28, 1999

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1 Paris 16, rue Drouot Paris France Phone: Fax: London 18 Mansell Street 3rd Floor London, E1 8AA United Kingdom Phone: Fax: EQE SUMMARY REPORT The European Storms Lothar and Martin, December 26-28, 1999 r i s k m a n a g e m e n t c o n s u l t i n g i n f o r m a t i o n s e r v i c e s g e s t i o n d e r i s q u e s c o n s e i l i n f o r m a t i o n World wide web: Corporate Headquarter 1111 Broadway, 10th Floor Oakland, CA Phone: +1 (510) Fax: +1 (510) European Headquarter EQE International, LTD 500 Longbarn Boulevard Birchwood, Warrington Cheshire WA2 OXF Phone: +44 (192) Fax: +44 (192) AMERICAS Alexandria, VA Bethesda, MD Boston, MA Fremont, CA Evergreen, CO Houston, TX Irvine, CA Los Angeles, CA Oakland, CA Richland, WA San Fransico, CA Santiago, Chile* Seattle, WA St. Louis, MO Stratham, NH Wilmington, DE EUROPE Aberdeen, UK London, UK Paris, France Sofia, Bulgaria Warrington, UK AFRICA Johannesburg, South Africa ASIA-PACIFIC Auckland, NZ* Singapore Seoul, Korea Tokyo, Japan Wellington, NZ* *Joint venture office r i s k m a n a g e m e n t c o n s u l t i n g i n f o r m a t i o n s e r v i c e s g e s t i o n d e r i s q u e s c o n s e i l i n f o r m a t i o n

2 Free of major storm damage since 1990, Northwestern Europe was battered by two large Extra-Tropical Cyclones after Christmas With hurricane force windspeeds, Lothar and Martin tore through Southern England, France, Southern Germany, Switzerland, Austria, Northern Italy and Northern Spain. At the time of this publication, the storms had caused over 140 casualties, 88 of which in France, which bore the brunt of the two storms, and economic damage is estimated at 10 billion Euros. These storms close the millennium with an exceedingly active year of natural catastrophes, with over 700 loss producing events occurring world-wide. Total damage is estimated at over 100 billion Euros, over 20 billion Euros of which was insured loss. The appalling human tragedy of an estimated deaths, hundreds of thousands of displaced and shattered lives and centuries of man years repairing damage has brought earthquakes, hurricanes, flooding, and windstorms to the forefront of the worlds attention. THE EUROPEAN STORMS LOTHAR AND MARTIN, DECEMBER 26-28, 1999 Windstorm formation Extra-tropical Storm Lothar The two storms propagated from separate Atlantic depressions loaded with warm air, which strengthened both as they made landfall and met with a cold air mass. Temperature contrast caused extreme turbulence along the weather front, creating the first storm (Extra-tropical cyclone Lothar ), which hurtled through Paris around 7AM on the 26th December and then proceeded to Germany and Switzerland around 10AM. Windspeeds were very high, but the remarkable aspect was the geographical spread of high wind speed as the atmospheric system crossed Europe. Gusts of over 210 km per hour were recorded at 4 AM in Brittany, with similar windspeeds recorded hours later in the Black Forest in Germany, hundreds of kilometres away. As the storm moved East through Europe, record windspeeds (gusts of over 241 km /h recorded in Zurich and over 170 km/h in Paris), gave rise to substantial damage, imposition of a state of emergency in Paris and the deployment of thousands of troops: Figure 1 shows a satellite picture of the weather system as it made landfall on the West coast of France. Table 1 shows the speed of gusts encountered at various locations in France. The distribution of maximum observed windspeeds from Météo- France are presented in Figure 2. A distribution of the windspeeds across Switzerland in presented in Figure 3. La Dole Changins Chasseral La Chaux-de-Fonds Neuchatel La Fretaz Pully Genève Cointrin Table 1: Example of Maximum Gust Windspeeds in France from Extra-Tropical Cyclone Lothar Figure 2: Distribution of the maximum gust speeds across France for storm Lothar (courtesy of Météo-France). Fahy Payerne 112,7 Plaffeien Oberschrot Moleson Aigle 87.8 Bern Liebefeld Grand St. Bernard LOCATION Basel Binnigen Ruenenberg Buchs Suhr 91.1 Wynau Napf Interlaken Jungfraujoch Adelboden Montana Sion Visp Fey 74.5 Evolene Villaz Zermatt Tempête du 25 au 26 décembre 1999 Valeurs maximales de "vent maximal instantané" Schaffhausen Zuerich Kloten Laegern Luezrn Pilatus Figure 1: Satellite picture of Lothar over France Figure 3: Distribution of the maximum gust speeds across Switzerland for storm Lothar (courtesy of the Swiss Meteorological Institute) Zuerich SMA Waedenswil Altdorf Stations dont l'altitude est inférieure ou égale à 500 mètres Taenikon Hoernli Glarus Locarno Monti 23.8 Magadino 27.4 Lugano 29.9 Stabio 16.9 Guettingen Engelberg 95.4 Disentis 42.8 Grimsel Guetsch Piotta 30.6 Ulrichen Comprovasco 20.5 Robiei 41.4 Cimetta St. Gallen Saentis Hinterrhein 80.3 San Bernardino Vadus GUST SPEED (KM/H) Lann Bihoué 162 Alençon 166 Rouen 140 Paris/ Montsouris 169 Orly 173 Dijon 126 Nancy 144 Colmar 166 Strasbourg 144 Chur Ems 51.5 Weissfluhjoch Davos Dorf 34.9 Scuol 16.6 Samedan 95.4 Corvatsch Robbia 17.3 KM/H

3 Extra-tropical Storm Martin A second storm (Extra-tropical Cyclone Martin ) issuing from a similar but different Atlantic system then hit the French West coast the next day. The windspeeds from the second storm, Martin, were generally not as high as those from Lothar. The storm, however, carried a lot of moisture, and damage stemmed not only from windspeeds but also from rain and subsequent flooding. The system affected most of Southern Europe, generating windspeeds greater than 170 km/h in Northern Spain (Asters); and windspeeds from 200 km/h in Aoste (Italy) to 150 km/h in Sicily, which was effectively cut off from the rest of the World by high tides and strong winds. Table 2 gives a sample of the windspeeds encountered across a range of locations in Italy, and an illustration of the wind patterns across Southern France is presented in Figure 4. As a result of the storm, the Alps in Southeastern France, Switzerland, Austria and Northern Italy were covered with heavy snow fall and a large number of avalanches took place. Frequency Of The Two Storms Table 2: Example of Maximum Gust Windspeeds in Italy from Extra-Tropical Cyclone Martin Table 3: A categorisation of the two storms in Comparison terms of wind intensity is shown in of Storm Intensities Table 3. The Saffir-Simpson scale is the scale commonly used to measure hurricane force winds in tropical cyclones, but can also be used to give an impression of the relative severity of winds in mid-latitude windstorms. During the course of the development of its proprietary risk management software, Eurowind, EQE, in cooperation with Swiss Re, has developed a different scale, the Storm Severity Index, which combines storm duration, the area affected by the storm and the maximum windspeed, in order to better reflect the nature of European windstorms. A comparison of these scales for the two 1999 and other historical European storms is presented in Table 3. 4 REGIONS GUST SPEED (KM/H) Val d Aoste Over 200 Piemont 150 Campane (Naples) 130 Sicily-Sardinia 150 Teramo 120 Sicily 130 Lazio 130 Macerata 134 Figure 4: Distribution of the maximum gust speeds across France for storm Martin (courtesy of Météo-France). Tempête du 27 au 28 décembre 1999 Valeurs maximales de "vent maximal instantané" Stations dont l'altitude est inférieure ou égale à 500 mètres KM/H 200 STORM BEAUFORT SAFFIR- EQE S STORM SCALE SIMPSON SEVERITY INDEX SCALE Martin ( ) * Lothar ( ) * Viviane ( ) Herta ( ) Daria ( ) J ( ) Capella ( ) *estimates with current data Based on its research of European windstorm activity of the past century, EQE estimates Cyclones Lothar and Martin to be respectively one in a 100 years and one in a 50 year events. On the scale of individual regions, the frequency of the windspeeds observed varied considerably. Examples are provided for France in Table 4. Table 4: Estimation of the frequency of the recorded maximum wind-speeds in France BEAUFORT SCALE DESCRIPTIVE TITLE AVERAGE SUSTAINED WINDSPEEDS OBSERVED (KM/H) 0 Calm Light air Light breeze Gentle breeze Moderate breeze Fresh breeze Strong breeze Moderate gale Fresh gale Strong gale Violent gale Storm Hurricane > 118 SAFFIR-SIMPSON DESCRIPTIVE AVERAGE SUSTAINED SCALE TITLE WINDSPEEDS OBSERVED (KM/H) 5 1 Weak Hurricane Moderate Strong Violent Destructive > 250 STORM STATION RECORDED ESTIMATED RETURN WINSPEED (KM/H) PERIOD Lothar Le Touquet, France 72 <10 years Paris, France years Nantes, France years Colmar, France years Vichy, France 90 <10 years Clermont-Ferrand, France years Gourdon, France 90 <10 years Carpentras, France 25 <10 years Carcassonne, France 86 <10 years St. Girons, France 83 <10 years Nice, France 108 <10 years Martin Le Touquet, France 54 <10 years Paris, France 72 <10 years Nantes, France years Colmar, France 72 <10 years Vichy, France years Clermont-Ferrand, France years Gourdon, France 126 <10 years Carpentras, France 32 <10 years Carcassonne, France 108 <10 years St. Girons, France years Nice, France 100 <10 years

4 Nearly 1 out of every 12 schools in France were damaged by the storm Numerous boats were damaged along the European west coast from Brittany in France to Northern Spain, with waves up to 10 meters high; and on the Lake Leman (Geneva, Switzerland), where windspeeds of more than 110 km/h damaged at least 27 boats. At construction sites, a number of cranes were toppled and fell onto adjacent houses, especially in the Paris area. Lifelines Damage All the distributed network systems were heavily disrupted by the storms: Power, TV and radio transmission antennae were blown down The telephone network was heavily damaged. France Telecom, which manages the network, estimates its repair costs at 0.7 billion Euros. Extensive damage was inflicted to electrical transmission towers, especially in France. After the storm, over 2 million people were without electricity. Despite the mobilisation of over 6000 soldiers, homes were still without power a week later. Electricité de France estimates the cost of reconstruction of the French electrical distribution network at 1.8 billion Euros, which need to be added to the 0.2 billion Euros needed for immediate repairs. It also estimates the system will be fragile as a result of the storm for the next two years. Road, air and train traffic was disrupted for up to several days during a period of intense traffic, causing huge business interruption economic losses. All underground links between France and Italy have been damaged by floodwaters. Thousands of travellers were left stranded at airports and train stations throughout France and Italy. Oléron-Tempête Oléron Charente Maritime AFP Agricultural Damage Economic Damage The current death toll is estimated at 140 victims, 88 or which in France alone. The exceptional windspeeds created by these two storms inflicted heavy and widespread damage, which was amplified by the flood and avalanche losses following the storms: Property Damage Structural damage was wide-spread across Europe: Extensive building roof damage throughout Europe. Repair costs are currently estimated at 77 million Euros for Paris and its surroundings alone; and 25 million Euros for the Bern county in Switzerland. Extensive damage was inflicted to national monuments in both France and Italy. The damage caused to French historic monuments is currently estimated to exceed 120 million Euros. Examples of damage to public property include in France roof damage to Notre Dame and forestry (over trees uprooted) and structural damage to the palace at Versailles; and in Italy, roof damage to Rome s Campidoglio town hall. Several million trees were uprooted by the hurricane-like winds A large number of fruit trees, vineyards and other trees, often the older trees, were uprooted. Numerous crops were ruined by the diluvial floods, and the majority of agricultural greenhouses were destroyed. The damage can be quantified only in the months and years to come. In addition, the loss of power affected the numerous chicken farms in Western France. In Italy, agricultural losses are estimated at 26 million Euros for the region of Lazio alone. Woods and forest in France, Germany and Switzerland were devastated by the storms. In France, an estimated 4% of the forests were destroyed, translating into roughly 90 million cubic meters of timber. As a consequence, the price of timber fell from 280 FRF par cubic meter to 170 FRF, a 40% fall in price. 6 Intempéries-Normandie St-Pierre-sur-Dives Calvados AFP 7

5 Insurance Aspects Market Losses for Storm Lothar ( ) Insurance wind losses are currently estimated at 5.8 billion Euros, with the majority attributed to France. Loss in Million Euros More than Insured Loss Estimates Using its state-of-the-art European windstorm risk assessment tool, Eurowind, from its EQECAT line of products, EQE estimated the insurance market losses from storms Lothar and Martin due to wind damage. The loss estimation for each storm and country is provided below. Market Losses for Storm Martin ( ) Non-Wind Induced Damage The storms also brought with them extensive flood, avalanche and mud slide damage. River floods took place in Southern England, the Netherlands, Belgium, France, Germany, Italy, Switzerland and Austria. Roughly threequarters of the 95 French metropolitan departments suffered flood damage. The storms also created heavy snowfall in the Alpine regions of France, Italy, Switzerland and Austria, which resulted in a large number of avalanches. Examples include the collapse of a mechanical lift in Crans-Montana (Switzerland) and the deadly avalanche near Galtuer (Austria) which killed nine people. Ile de la Cité (Central Paris) under water Repairs to French historical monuments, such as the Notre Dame Cathedral, are estimated at 120 million Euros 8 Intempéries-Tempête-Forêts Vendenheim Bas Rhin AFP Indirect Economic Losses The indirect effects of the storms are very heavy, and affect industrial, tourism and agricultural activities. The main industries affected were: Manufacturing, which was affected by loss of power Tourism: the complete breakdown of the transportation and communication systems caused the cancellation of numerous holidays, and the loss of power affected the Year 2000 celebrations in many cities. Direct economic damage is estimated at 10 billion Euros for all of Europe. Indirect economic losses are expected to exceed direct economic losses, but could have been much worse had the events occurred over a busier period of the year. In addition to the wind-induced damage, the flood, mud flow and sea-wave induced losses are also substantial. All non wind-induced losses which occurred in France are covered under the French national CATNAT system (see CATNAT box). To date, the state of CATNAT was declared in 73% of the French departments following the two storms. STORM LOTHAR (26/12/99) France Germany Switzerland UK Belgium Total Europe STORM MARTIN (28/12/99) France Italy Spain Total Europe BOTH STORMS Total Europe 4.6 Billion Euros 0.1 Billion Euros 0.1 Billion Euros 0.05 Billion Euros 0.05 Billion Euros 5.0 Billion Euros 0.67 Billion Euros 0.1 Billion Euros 0.05 Billion Euros 0.82 Billion Euros 5.8 Billion Euros 9 Loss in Million Euros French CATNAT System: The French CATNAT system, put into effect by law in July 1982, consists of adding to in-force fire, damage and business interruption property insurance contracts a coverage for property damage due to natural catastrophes. This coverage is mandatory and the premium rate is set at a fixed rate by law for each risk type. In return, the State puts at the insurers disposal the availability of an uncapped stop-loss reinsurance coverage, provided by the Caisse Centrale de Réassurance (CCR). CCR acts as a traditional reinsurer, with the exception that it has the guarantee of the French State in case the losses exceed its reserves. To activate the CATNAT coverage, the commune, canton or department has to be declared a CATNAT zone by the department prefect, and accepted as such by an intraministry legal document. The natural catastrophes covered by the CATNAT system are described in the law, and encompass most perils, except for wind- and hail-induced damage, which are considered to be insurable by the traditional market. The CATNAT system has already been abundantly put to use in 1999, with flood losses in the Doubs region of Southern France causing a market loss of roughly 500 million Euros in November.

6 1999 storms compared with past storms Figure 5: Comparison of windstorm Lothar with other major European storms (courtesy of Météo-France) 1990 was previously the worst year on record in terms of insured losses on both a European basis and in local markets. The 1999 storms have now changed this, especially with regards to the French market. The total loss from these two events (5.8 billion Euros) will not exceed the last record losses for Europe, 10.2 billion Euros (original losses NOT actualised) from the 1990 storms. The 1990 storms stemmed from a much larger atmospheric system, which covered Europe for a much longer period of time, thus inducing more damage. However, the insured losses in France from these two storms (5.2 billion Euros) exceed the previous record loss of 1.5 billion Euros from these previous storms. The insured market losses in France from Cyclone Lothar are estimated to be 2.5 times losses at 1999 values from Cyclone Herta (1990D) and almost four times those from Cyclone Daria (1990A). On a European-wide basis, the market loss from Cyclone Lothar are roughly double the actualised losses from Cyclone Herta and half the actualised losses from Cyclone Daria. Figure 6: Comparison of windstorm Martin with other major European storms (courtesy of Météo-France) C O N C L U S I O N! After the relative lack of activity since 1990, the December 1999 storms are a shocking reminder that Europe is frequently exposed to violent winter storms, which cause wide-spread damage throughout Northwestern Europe. French prime minister Lionel Jospin said This storm is a catastrophe without precedent. It was an exceptional, cataclysmic event with massive consequences. While the consequences are massive, the damage suffered is not uncommon, and can be expected to occur again in the next century. The storm loss could have been even worse if it had occurred a few kilometers North, affecting more Southern England, Belgium and the Netherlands. The estimated market loss of 5.8 billion Euros could have been much higher. A comparison of the measured windspeeds for France between major historical events is given in Figure 5 and 6 below. At EQE International, we are committed to lead the research in the field of natural hazards, to translate this knowledge into our proprietary modelling tools, and to provide our customers with the latest and most accurate information. 10