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C-CIARN & TRCA Workshop – November 3, 2005Regional Risks and Water Management Vulnerabilities

Alan Pang CGI Insurance Business Services

Risk Management of Sewer Back-up Exposures

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Outline

CGI Group Inc & CGI IBSRisk ManagementInfrastructure Deficit – Sewer SystemsIdentifying and Analyzing Loss Exposures:- Peterborough- Ottawa- Kitchener/Waterloo- Cambridge- Guelph- Windsor- Toronto

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CGI Group Inc.Founded in 1976Largest Canadian independent information technology services firm5th largest in North AmericaEnd-to-end IT and business process services to clients worldwideJan 2003 acquired Underwriters Adjustment Bureau (1951) and Insurers’ Advisory Organization (1883)CGI Insurance Business Services Division- Underwriting Consulting ServicesISO 9001www.cgi.com

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Why are Clients Choosing CGI?

Flexibility Customized services and contractual relationships

Global Delivery ModelValue & control through onsite /offsite / nearshore / offshore

Superior Industry ExpertiseUnderstanding our clients’business

CommitmentTo quality service delivery and client satisfaction

Quality SystemsISO9001:2000, SEI CMM Level 5

Credit Union Cent ra l of CanadaCredit Union Cent ra l of OntarioCredit Union Cent ra l of Alberta

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CGI Insurance Business Services

Underwriting Consulting ServicesAdvisory rates for Commercial Property & Liability60,000 commercial business and 100,000 home inspections per yearFire Underwriters SurveysRisk management and loss preventionClaims management Manages Nuclear Insurance Association of CanadaHistorical Environmental Info Reporting System

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Risk Management

The process of making and implementing decisions that will minimize the adverse effects of accidental and business losses on an organization, municipality or individual

Making these decisions involves a five step process:1. Identifying and analyzing loss exposures2. Examining the feasibility of alternative risk mgmt

techniques3. Selecting the best techniques4. Implementing the chosen techniques5. Monitoring and improving the risk management program

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Risk Management – Steps 1 and 21. Identifying and analyzing loss exposures2. Examining the feasibil ity of alternative risk mgmt techniques

Risk Control - exposure avoidance (can’t do anything about rain)- loss prevention (Bill 148 - preparedness) - loss reduction (Bill 148 - mitigation)- loss exposure separation or duplication- contractual transfer for risk (eg buy insurance)

Risk Financing- current expensing of losses (pays as you go)- unfunded loss reserve (accounting liability)- funded loss reserve (backed by cash, security etc)- earmarked funds set aside within the municipality- borrowing funds to pay for losses- insuring through an affiliated captive insurer, reciprocal

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Old Infrastructure

In 2002 Canadian Society for Civil Engineers reported: - 30% of public infrastructure is more than 80 years old- 80% of the useful life of all public infrastructure have been consumed

- If repairs are neglected, then replacement will cost 125 times more than good maintenance expenditure

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Lack of Infrastructure Investment

Canadian Council of Professional Engineers estimated municipal infrastructure deficit $60B and growing at $2B/yrConference Board of Canada estimated the public infrastructure deficit between $50B and $125B1990’s Provinces offloaded responsibilities to municipalities without transferring adequate cashFiscal and financial imbalance as 53% of municipal revenues comefrom property taxes vs. 23% in USFrom 1999 to 2003, Federal rev enues increased by 12%, Provinces by 13% while Municipal governments by only 8%From 1993 to 2003, transfers decreased by 37%In 1993, transfer accounted for 25% of municipal revenues; in 2003 they accounted for only 16%

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Sewer SystemsSewers systems are oldLack of investment Increase frequency of severe weatherUnder designed storm sewers to handle increased population density and increased rainfall intensitiesDecaying infrastructure systems e.g. collapsed pipesPoor operational practices e.g inspections, maintenance & prioritizationCombined sewer systemsPartial obstructionsLack of authority for engineers to make decisionsBackflow valves and sump pumps with independent powerPrimary Barriers e.g. lack of applied research and gaps in codes and enforcement standardsLack of research repository for sewer back-up advancementsHealth Risks – mould linked to allergic reactions, asthma attacks and other respiratory problems

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2004 Flood & Sewer Back-up Season

January - LavalJanuary - New Brunswick & PEI

March – LondonApril – Manitoba

July – EdmontonJuly – PeterboroughAugust – New Brunswick

September – Quebec City

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Flood Event 2: June 16-19, 2005 Precipitation

Drayton Valley

Camrose

Wainwright

Rocky Mountain HouseRed Deer

Coronation

Sundre

Hanna

Drumheller

Banff

Calgary

High River Brooks

Medicine Hat

Lloydminster

Jasper

Oyen

14 CommunitiesAffected Including:SundreRed DeerDrumhellerDrayton ValleyRocky Mtn House Edmonton PriddisCalgaryHigh RiverBlack DiamondTurner ValleyOkotoksBragg Creek

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1

25

50

75

100

125

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Kriging Contour Map

66 hours 12:00 16 June 2005

12:00 19 June 2005 CitiesRiversBasins

Lakes

0 100000 200000

Distance in Meters

Precip.(mm)

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High River, Alberta – June 2005

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Geographical Information System

A software used to help business and govt better understand patterns and trends in their tabular dataDisplays multiple thematic data layers simultaneouslyEnables powerful spatial analysisConverts street addresses to longitude and latitude

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Habitational Insurance Tracking System (HITS)

On-line access to 98% of historical personal property claims across CanadaStarted on August 10, 1992 and now contains over 7M claims e.g. fire, windstorm, burglary, theft, smoke damage …Designed primarily to assist in underwriting of new homeowner policiesHelps to identify undeclared losses and potential loss frequency problems

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CTS – Commercial Tracking System

On-line access to historical commercial claims information right across Canada70% of the Insurers participateMore than 50% of the time, CTS users find non-disclosed claims in the database when processing insurance applications! CTS users can track historical claims information by insured name or by street address of the property. Effective anti-fraud tool

2,255,096,307455,19011,802798,526,61067,6633,7591,456,569,697387,527Totals

58,958,48016,091---3,66458,958,48016,091Windsor & La Salle

1,158,900,000220,77015,523510,800,00032,9033,450648,100,000187,867GTA including Toronto

8,143,6001,1979,5613,776,4543955,4454,367,146802Timmins

172,143,74623,07511,73922,527,5521,9197,072149,616,19421,156Peterborough

166,133,91824,7918,81895,589,62910,8405,05770,544,28913,951Ottawa

60,574,62311,7187,24839,003,7995,3813,40421,570,8246,337London

42,911,7768,1367,80129,682,9913,8053,05413,228,7854,331Kitchener/Waterloo

543,600,000136,8598,10092,100,00011,3633,598451,500,000125,496Central Ontario

12,604,8844,7803,5782,168,0006062,50010,436,8844,174Guelph

10,172,1521,2686,9212,595,4583758,4857,576,694893Fort Frances

4,600,0138524,874146,227305,4184,453,786822Dryden

13,572,2395,185---2,61813,572,2395,185Cambridge

2,780,8764682,967136,500466,2662,644,376422Atikokan

Total Gross Incurred Loss

$

Total No. of Claims

Average Claim $

Total Gross Incurred Loss $

Total No. of Claims

Ave. Claim $

Total Gross Incurred Loss $

Total No. of Claims

Urban Centre

H I T S & C T SCTS 30, 31, 32, 33 & 34HITS 30, 31 & 39

Ontario – Sample HITS & CTS Data

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100 50

200300

350

June 9-10, 2002 Extreme Rainstorm- Affected S. Manitoba, NW Ont & Minnesota- 2 weeks later another 100 mm- Peterborough, Ontario 200 mm the next day

Peterborough June 2002 – HITS Claims

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Peterborough July 2004 – HITS & CTS Claims

Ottawa Airport Rainfall Measurements –June 2002

213.0Total

57.0June 27

25.2June 26

5.0June 17

10.2June 16

37.8June 15

15.6June 14

4.0June 12

59.0June 11

Amount of Rain (mm)Date

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Ottawa International Airport –Max One Day Rainfall 1860 to 2003

1 94.0 October 4, 1887 11 66.0 August 9, 19592 84.3 September 9, 1942 12 63.0 September 12, 19633 82.3 June 7, 1971 13 62.5 June 10, 19624 75.7 July 9, 1952 14 61.7 September 5, 19185 74.2 August 8, 1973 15 61.6 June 23, 19576 71.1 August 11, 1887 16 59.4 August 10, 19527 71.1 March 18, 1981 17 59.0 June 11, 20028 69.6 July 9, 1967 18 58.9 July 5, 19509 69.3 September 6, 1958 19 58.9 July 1, 195910 66.6 August 4, 1981 20 57.0 June 27, 2002

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June 2002 HITS Sewer Back-up ClaimsOttawa, Ontario

137

61 6034 20 9 8 7 4 6

020406080

100120140160

0 - 5,000

5,001 - 10 ,0 00

10,001 - 15,000

15 ,001 - 20, 0

00

20 ,001 - 25,000

25,001 -30,000

30,001 - 35, 00

0

35,00 1 -

40, 000

45,001 -5

0,000

Over 50,000

Total Loss $

No. o

f Cla

ims

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FSA by Total Claims $ and Pct. of Houses with Claims

5,448$4,548,91731.76%8356,597$1,161,1216.69%1762,629K4M

3,762$5,247,78113.89%1,3955,943$1,265,7672.12%21310,044K1J

3,782$6,235,98016.14%1,6496,038$1,274,1112.06%21110,220K2H

4,337$3,738,7699.28%8627,420$1,409,7662.05%1909,289K1L

4,392$5,547,57218.69%1,2637,490$1,430,6162.83%1916,756K1H

4,135$4,362,71116.24%1,0557,415$1,431,1562.97%1936,497K1B

3,891$4,548,78513.73%1,1699,719$1,486,9681.80%1538,517K4A

4,667$4,358,8547.01%9349,867$1,578,7451.20%16013,322K1N

3,748$7,023,58612.28%1,8747,841$1,630,9161.36%20815,263K2G

4,160$7,558,67115.50%1,8176,970$1,937,7932.37%27811,720K1S

4,669$6,210,0239.67%1,3307,571$1,960,9601.88%25913,752K1K

4,472$6,126,07718.93%1,3707,866$2,194,6273.86%2797,237K2L

4,242$7,139,35211.86%1,6837,346$2,556,3572.45%34814,193K1G

6,121$10,026,81729.97%1,63811,898$5,211,3618.01%4385,465K1E

Average30, 31 & 39Claims $

Total 30, 31& 39 Claims $

Pct% of

HousesWith

Claims

No of30, 31& 39

Claims

Ave $Total 39Claims $

Pct% of

HousesWith

Claims

No of39

Claims

TotalNoof

Houses

FSA

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Ottawa - Percentage of Houses with Claims

Total no. of houses in Ottawa 294,344 as at Feb 20045,316 sewer back-up code 39 HITS claims costing $37.3M1.81% of all houses had sewer back-up HITS claims36,636 Code 30, 31 & 39 HITS claims costing $143.2M12.5% of all houses had 30, 31 or 39 HITS claims

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Cambridge – HITS Claims by Top 5 FSA

$13.29M14.9%5,11534,339Total

$1.15M12.4%3853,116N1T

$2.34M14.6%9256,337N3H

$2.47M13.1%8976,872N3C

$2.86M19.7%1,1605,885N1S

$4.47M14.4%1,74812,129N1RClaims $

Houses with Claims

No. of Claims

No. ofHousesFSA

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Kitchener/Waterloo – HITS Claims by FSA

$17.65M17.5%6,06934,658Total

$2.73M15.9%1,0016,299N2A

$2.92M16.15%8885,498N2T

$3.81M17.1%1,2857,512N2L

$3.92M18.5%1,5178,203N2M

$4.27M19.3%1,3787,146N2NClaims $

Houses with Claims

No. of Claims

No. ofHousesFSA

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Guelph – HITS Claims by Top 5 FSA

$10.25M12.6%4,08732,460Total

$0.29M4.2%681,615N1L

$0.43M9.8%1791,835N1K

$2.73M13.1%1,1118,461N1G

$2.29M11.4%1,1279,901N1E

$4.51M15.1%1,60210,648N1HClaims $

Houses with Claims

No. of Claims

No. ofHousesFSA

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Windsor & LaSalle, Ontario – HITS Claims

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Windsor – HITS Claims by Top 5 FSA

$24.95M23.88%6,23726,121Total

$5.42M19.95%1,4377,202N9E

$2.55M22.35%6192,769N9H

$0.60M23.58%104441N9K

$9.10M24.32%2,1268,740N8N

$7.28M28.00%1,9516,969N8SClaims $

Houses with Claims

No. of Claims

No. ofHousesFSA

Windsor & LaSalle, Ontario - FSAs

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HITS & CTS Claims – All Years

Toronto West – HITS & CTS All Years

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Central Ontario & GTA – All Years HITS & CTS

$4,761$1.70T357,629Total15,523510.8M32,903CTSGTA

3,450648.1M187,867HITSGTA8,10092.1M11,363CTSCentral Ont. 3,598451.5M125,496HITSCentral Ont.

Average Claim $

Insured Loss $

No. of ClaimsDataMap

Insured Loss after deductible has not been adjusted for inflation.

Central Ontario - May 2000 Rainstorm

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GTA - May 2000 Rainstorm

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May 2000 Rainstorm

$8,330$79.6M9,556Total21,54615.7M730CTSGTA

7,51649.1M6,537HITSGTA7,1201.1M160CTSCentral Ont. 6,43513.7M2,129HITSCentral Ont.

Average Claim $

Insured Loss $

No. of ClaimsDataMap

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May 2000 Rainstorm – TOP 5 HITS FSAs

$49.1M0.71%918,8786,537Ov erall Total2.3M2.907,386214L5J2.5M3.077,220222M5M2.7M3.107,315227M9B3.5M3.306,544216M3H4.3M3.328,364278M2N

Insured Loss

Loss Frequency

No. of Houses

No. of ClaimsFSA

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2:00 to 4:00pm

Brampton – 100 mm

Toronto – Hail Golf balls

EC - 136mm

Yonge & Steeles 175mm

Many reports of trees down, sewer back-up & flash flooding

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Toronto (Pearson Airport) –Max One Day Rainfall 1840 to 2003

Rank Rainfall (mm) Date Rank Rainfall (mm) Date1 121.4 October 15, 1954 11 64.8 October 5, 19952 118.5 July 28, 1980 12 63.1 September 10, 19863 108.0 September 18, 1948 13 58.7 January 9, 19464 92.7 May 31, 1944 14 59.7 August 7, 19725 86.1 November 10, 1962 15 59.4 May 12, 20006 80.8 August 30, 1970 16 59.2 July 31, 19707 71.6 August 26, 1986 17 58.7 August 13, 19588 67.8 May 12, 2000 18 57.1 September 14, 19829 66.8 August 22, 1968 19 55.8 April 11, 199210 66.4 September 7, 1996 20 54.9 July 12, 1964

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In the GTA…

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August 19, 2005 Rainstorm & Tornado Event –Claims Estimate as at October 2005

100.00%$20,847$360,448,39117,290Total8.87%50,414$77,335,7821,534Commercial Property

69.16%19,070$228,038,24111,958Personal Property -Sewer Back-up

9.84%18,840$32,065,7051,702Personal Property -Wind & Hail

12.12%10,977$23,008,6632,096Automobile Physical Damage

% of Claims

Average Claim $Total Loss $No of

ClaimsClass of Business

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Hurricane Hazel - Case Study Result

♦ Estimated direct physical flood and water damage losses:

Riverine flooding $240Water damage basements $400

Total $640 M

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So what been done about the problem?

In 2001, the federal government, through its Infrastructure Canada Program and the NRC, joined forces with the FCM to create the National Guide to Sustainable Municipal Infrastructure

Appointment of Paul Godfrey as Minister of State Infrastructure and Communities2004 Federal Budget – GST rebate for municipalitiesFebruary 2005 Federal Budget – Federal gas tax transfer

June 2005 Federal Budget – New Deal $5B of the Federal gas tax revenues over 5 yrs2005 FCM Conference St. John’s – PM compared the cities and communities infrastructure problem to a “national project” similar to the building of our national railway.

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In 1995, the Prime Minister spoke of eliminating the budget deficit“come hell or high water”

Looking back, he was right – we have eliminated the budget deficit BUT why is the water still rising?

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Summary

CGI Group Inc & CGI IBSRisk ManagementInfrastructure Deficit – Sewer SystemsIdentifying and Analyzing Loss Exposures:- Ottawa- Kitchener/Waterloo- Cambridge- Guelph- Windsor- Peterborough- Toronto