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Steep Calgary flood losses could make it the region's costliest-ever disaster

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Steep Calgary flood losses could make it the region's costliest-ever disaster

The recent severe flooding in Alberta, Canada could be the region's costliest-ever natural disaster.

Bank of Montreal said economic damages from the floods that began in late June likely will be between 3 billion Canadian dollars and CA$5 billion ($2.87 billion and $4.78 billion).

Roughly 75% of the economic losses likely will be insured, which also would make the disaster one of the largest insured catastrophe losses for the nation.

Industry sources said it could take several weeks before the full extent of losses is known.

Preliminary estimates suggest that economic losses will fall into the multibillion-dollar range, said Steve Bowen, a London-based senior scientist with Aon Benfield's Impact Forecasting team, a unit of brokerage Aon P.L.C. While many losses will not be covered by insurance, insured losses could reach about CA$1 billion ($956.1 million), he said.

In a statement, Intact Insurance, a unit of Intact Financial Corp. and Canada's largest property/casualty insurer, said “it will be difficult to fully assess and quantify the damage for a number of weeks.”

The company said, “Intact Financial Corp.'s reinsurance coverage starts when damage reaches” CA$100 million ($95.6 million) pretax. “Beyond this amount, IFC's retention declines from 12% in a stepped manner.”

Homeowners policies in Canada do not cover damage caused by overland flooding, according to the Insurance Bureau of Canada.

“However, some damage may be the result of sewer backup. Coverage for this type of damage is available but must be purchased as an add-on to a home insurance policy,” said Bill Adams, vice president for the western and pacific region for the Canadian insurance bureau.

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A spokesman for the bureau said the floods likely will result in significant rate increases for homeowners in affected areas.

The floods which, according to Risk Management Solutions Inc., resulted from an intense low-pressure system that brought unusually heavy rainfall to the region for about 36 hours. The system caused widespread flooding in downtown Calgary, Alberta, as well as surrounding areas.

RMS and other catastrophe modeling firms do not model Canadian floods.

Tens of thousands of Calgary-area residents were evacuated after several rivers burst their banks and a state of emergency was declared, Mr. Bowen said. Most regional businesses were shut down, almost all public transportation was suspended and schools were closed, he said.

Significant flood damage also was reported at the Scotiabank Saddledome stadium, home to the Calgary Flames hockey team.

“Preliminary reports suggest that the level of damage is much worse than the last major flood event that occurred in 2005,” Mr. Bowen said.

“That event damaged at least 40,000 homes in Calgary and forced the evacuation of 1,500 residents. Insured losses in 2005 were listed at $275 million Canadian.”

The floods caused power outages in Calgary, which is Canada's oil capital, and are suspected to have caused the spillage of 750 barrels of synthetic oil from a pipeline in northern Alberta, according to Calgary-based Enbridge Inc., which operates the pipeline that suffered the leak.

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Enbridge said the leak might have resulted “from ground movement on the right-of-way as a result of recent unprecedented precipitation levels which exceeded a 1-in-100-year event.”

The energy company said it shut down all its pipelines in the area as a precaution.

In a statement, the company said the cost of containing and cleaning up the leak had not yet been estimated.

“Enbridge carries liability insurance for sudden and accidental pollution events, and expects to be reimbursed for its covered costs,” which the company said is subject to a CA$10 million ($9.6 million) deductible.