Fort McMurray forest fire insured loss totals $3.58 billion

Fort McMurray forest fire insured loss totals $3.58 billion

7 July 2016

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Canada — The final damage tally resulting from the Fort McMurray wildfires totals $3.58 billion dollars, the Insurance Bureau of Canada has announced – more than double the $1.7 billion in losses incurred from the southern Alberta floods in 2013.

The estimate is based on data collected by Catastrophe Indices and Quantification Inc. (CatIQ), which compiles and combines comprehensive insured loss amounts based on surveys with insurers.

“There’s little doubt that Fort McMurray was the most horrific catastrophic natural disaster in Canadian history,” said Bill Adams, vice president, Western & Pacific at IBC on a conference call with the media.

He added that while a number of estimates have been released in the months following the fire, the IBC “thought it prudent to collect the most comprehensive and accurate data at this stage of the event.”

There was a wide variety of damage costs estimated, some that literally came before the fire left the community, and well in advance of on-the-ground assessments by insurers.”

The losses arise from 27,000 personal claims, averaging at $81,000 each, 50,000 commercial claims, averaging $250,000 each, and 12,000 auto claims, averaging $15,000 each.

“This is unprecedented, and this is ultimately what insurance is for,” Adams said. “In terms of scale and scope, the property and casualty industry is in uncharted territory, and it is vital to ensure we work with municipal and provincial authorities as we collectively navigate through the event.”

Adams said it is not anticipated the wildfire will cause premiums to rise at this time. “The reality is, insurers will tell you no single event – not even one of this magnitude – will in of itself trigger premium increases. The industry looks at long term trends in claims as an indicator of where claims will go… In Alberta, unfortunately, this wildfire was the largest – but unfortunately a series of significant claims events have taken place in Alberta over the last few years. Most Albertans who had renewals will have seen a premium increase. What will impact premiums in this case will be determined at a later date.”

A major differentiation between the wildfires and the preceding 2013 floods is the amount of insured loss; during the flooding, a widespread lack of overland flood insurance meant insurers picked up a relatively smaller bill.

“The mass majority of cost will be borne by insurance providers in one way or another, which was not the circumstance in the southern Alberta flooding,” Adams says. “While that came to $1.7 billion, that was largely from losses where you could purchase insurance, sewer backup for example. However, at that time, you could not purchase insurance for overland flooding losses. The overall cost was somewhere in the $6 billion range, but $1.7 billion was covered by insurance, and the rest by individuals.”

Adams also praised the insurance industry’s hands-on support during the wildfires, saying it set a new standard in cat response.

“It has been a very active two months. From very early on, literally within days of the evacuation, the insurance industry was granted unprecedented to regional emergency operations centres – no one in the insurance industry can remember a time when the industry was so involved in assessing the impact and scope of the event, and beginning to develop the connections and relationships that are so vital beyond the initial response phase,” he says.

Adams added that as early as next week, a coordinated debris removal program that will provide services to homeowners with complete losses. An estimated 1,800 stand-alone houses were damaged in the fire, in addition to 600 multi-unit structures.

The IBC is now working directly with the municipal council as they make decisions in the rebuilding process.

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