CANADA – Home builders and property owners in British Columbia are seeing an increase in the number of insurers who are refusing to approve insurance policies for both residential and commercial buildings that are located near an active wildfire – in some cases fires that are burning 100 kilometres away.
“Those are quite sudden changes from historical practices,” said Carmina Tupe, director of policy and government relations at the Canadian Home Builders’ Association of British Columbia. “Those are very large radiuses that sometimes can span an entire city. The issue is that it’s a bit of a blanket approach.”
British Columbia has experienced one of the most active wildfire seasons, with nearly 1,600 wildfires so far this year. The fires can continue to burn for months, well beyond the date an evacuation order has been cancelled. The spike in activity has led to property and casualty insurers reassessing their risk portfolios and toughening underwriting rules during the wildfire season.
As a result, some home builders are experiencing months-long delays in construction, home buyers can’t secure mortgages without insurance contracts, and property owners – both commercial and residential – are left shopping around for last-minute coverage as their existing policies are set to expire.
“Many insurers have been reducing their exposure to customers that are near forests,” said David Edgar, chief broking officer at Capri CMW Insurance Services Ltd.
Mr. Edgar said while some insurers are “doing the right thing” during the wildfire season and extending coverage for customers whose insurance is expiring or renewing while in the vicinity of a fire, other insurers will not accept a new risk if a property is in peril.
“Regulators need to intervene to protect customers,” he added.
Homeowners’ insurance typically protects a structure that has already been built against damages and theft. Builder’s risk insurance – also known as course of construction insurance – covers a residential or commercial property that is underconstruction, and includes both the building and construction materials, as well as any damage because of an insured event, such as fire, flood, theft or vandalism.
During wildfire season, many insurance companies have typically placed temporary halts on the sale of both homeowners’ insurance policies and builders’ risk insurance for properties and construction projects that are within a 25-kilometre radius – deeming them to be properties that are under “imminent threat.”
Now, that boundary is getting pushed out to 55 kilometres to 100 kilometres, said Jenna Abbott, operations manager at Sunterra Custom Homes, in an interview.
“This has given us a multitude of challenges in our business,” Ms. Abbott said. “In one scenario we have been told it could be winter by the time the fire will be out and only then will we be able to begin construction for some projects.”
Rob de Pruis, director of consumer and industry relations at the Insurance Bureau of Canada, a national industry group with 74 insurance company members, said they are aware of the temporary restrictions of coverage during the wildfire season, but urged home builders and property owners to “shop around,” as coverage is available.
“There are over 60 insurance companies that provide commercial insurance in British Columbia and they are all bound by the federal competition act – meaning they all have to remain competitive and make independent business decisions on some of these restrictions,” Mr. de Pruis said.
As well, the IBC released an information bulletin this summer advising clients that renewals of existing policies should continue to take place, regardless of the wildfire threat.
“Many policies include a ‘declaration of emergency endorsement,’ which extends the expiration date of policies when an emergency is declared by government, and ensures that the existing policy stays in force until an emergency order is terminated,” the IBC said in the bulletin.
But Mr. Edgar at Capri CMW said not all insurers include this endorsement and he recommends the industry make this a “statutory condition with language that addresses any catastrophic threat.”
“I’ve received several notices of non-renewals from insurers with no option for extension ,” Mr. Edgar said. “… As a broker advocating for our clients, I hope that we as an industry can agree that intentionally forcing a customer into an uninsured position is unfair and needs to be corrected.”
For the home builders’ association, troubles with insurance pose a threat to housing supply that is desperately needed in the province.
“It’s really challenging, because we are in the height of construction season,” Ms. Tupe said. “If our members miss this construction period, they don’t miss it just for a couple of months – they might miss the entire season and have to postpone the project until next year.”