Insurance and the Polar Vortex: Recovering Losses from the Big Chill of 2014

The first two weeks of 2014 ushered in an extraordinary weather disaster affecting most of the United States, causing extensive property damage and business interruption as a result of freezing temperatures. On January 3, 2014, a “Polar Vortex,” a circulating pattern of cold air originating in the Arctic north, was drawn south into the United States, bringing with it unusual frigid conditions, ice storms and snow. The big chill froze pipes and sprinkler systems, interrupted chemical manufacturing and disrupted transportation systems. In fact, all 50 states experienced freezing temperatures – even Hawaii. Temperatures were so cold that a polar bear kept at Chicago’s Lincoln Park Zoo was moved inside.

Preliminary estimates indicate that the Polar Vortex will cost the U.S. economy approximately $5 billion. As in any natural disaster, impacts varied by industry sector and location. Real estate assets were hit particularly hard. One of the most common impacts of the cold weather was freezing pipes. Pipe freeze-up and unfreezing damages were particularly severe in southern climes, where piping systems lack freeze protection more common in the north. Even in the northeast, property owners saw significant pipe failures. In some cases, fire sprinkler systems froze, allowing fire to spread due to the lack of fire protection.

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