A.M. Best briefing on Alberta wildfires
Toronto, ON (May 12, 2016) – An enormous raging wildfire near the Northern Canadian city of Fort McMurray, Alberta has damaged or destroyed more than 1,600 homes and structures and is threatening 19,000 more. The blaze has engulfed entire neighborhoods, business districts and has burned more than 18,500 acres. Mass evacuations continue, and a state of emergency has been declared for the entire province of Alberta, according to a new A.M. Best briefing.
The Best’s Briefing, titled, “Alberta Wildfires May Be Costliest Catastrophe Ever for Canadian Property/Casualty Industry,” states that the operational impact of this event on the insurance industry will be vast, and associated businesses such as disaster restoration companies may be expected to assist in mitigating damages where possible.
From an insurance coverage perspective, homeowners’ policies generally provide for the structure, the contents and living expenses that are incurred during dislocation. Although automobile policies generally provide physical damage coverage for fire losses under comprehensive coverage, this coverage is optional. Businesses, in addition to coverage for structures, may also have business interruption protection, which would offset lost sales or earnings. While it is still early, this event will likely have significantly more losses than the Slave Lake Fire in May 2011, also in Alberta, which had insured losses of more than CAD 700 million. The Fort McMurray Fire is much larger geographically, and has already burned more structures and is impacting an area where average home values are much greater than those affected by the Slave Lake Fire.
This event has the potential to be the costliest catastrophe ever to impact the Canadian property/casualty market, possibly exceeding the nearly CAD 1.9 billion in losses generated by the January 1998 ice storm in Quebec and the 2013 flooding in Southern Alberta. While the losses from this fire will be substantial, many of the top homeowners’ and automobile writers in Alberta have diverse national geographical and product profiles, and possess strong risk-adjusted capitalization, comprehensive reinsurance programs and solid overall risk management capabilities.
A.M. Best will continue to monitor the financial impacts on rated entities of this fluid situation and will provide updates on ratings as warranted.
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