Magazine article Risk Management

The Insurance Impact of the Fort McMurray Fire

Magazine article Risk Management

The Insurance Impact of the Fort McMurray Fire

Article excerpt

On May i, a wildfire started in the Fort McMurray, Alberta, Canada, area that quickly spread from forests to neighborhoods, displacing more than 80,000 people, causing two fatalities and outpacing local firefighters' capacity to contain it. The fire became the largest and most expensive natural disaster in Canada's history, surpassing floods in Alberta in 2013 in which four people died and 100,000 were forced to evacuate. It is also the largest wildfire event in North America, followed by the "2003 Firestorm," in which 15 wildfires burned 800,000 acres in Southern California.

The Fort McMurray wildfire charred more than 1.43 million acres of land and destroyed at least 10% of the city, including more than 2,400 homes, businesses and other structures. Nearby oil sands operations were also stalled temporarily.

To make matters worse for Fort McMurray residents, less than two months after the fire broke out, torrential rain flooded the streets and destroyed some 40 homes that had survived the fire. Some residents were forced to wait for debris from both events to be cleared before they could return. "My God, I'm sure they were wondering would the locusts be next. I mean, it's so biblical. They had the fires and the drought and now the floods," David Phillips, Environment Canada's senior climatologist, told Canada's Globe and Mail. "

Commercial and personal damages from the wildfire are estimated at $6 billion, according to the Insurance Bureau of Canada. Thomas Johansmeyer, assistant vice president of property claim services strategy and development at Verisk Insurance Solutions, said the preliminary estimate for insured losses has come in at $3.3 billion (C$4.6 billion). Oil sands losses are included in the commercial component of the estimate.

Reinsurers are also expected to take a hit due to the substantial level of claims. Jim Lynch, chief actuary at the Insurance Information Institute, told The Royal Gazette that he expected insured losses to "dent the second-quarter profits of insurers and reinsurers."

Much of the loss was absorbed by Canadian insurers, Johansmeyer said, however, "reinsurance is attaching, so the loss will be distributed worldwide." While he does not yet have a breakdown of the ceded rates to reinsurers, "I have been getting a lot of calls from reinsurers and reinsurance brokers, because there is definitely an impact. …

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