It’s been a full year since the devastating Fort McMurray wildfires tore through northern Alberta, destroying 2,579 homes and triggering the worst insurance loss in Canadian history. Approximately $3.8 billion was paid out as a direct result of the blaze.
There were roughly 48,000 insurance claims from the fire, largely made up of 12,000 auto and 25,000 home claims, averaging $80,000 per claim. On the first anniversary of Canada’s worst natural disaster in recent memory, Swiss Re’s head of underwriting for Canada, Balz Grollimund, reflected on lessons learned for an insurance industry still shaken from what happened in oil country.
“For the insurance industry to be proactive, being on the ground quickly and working together with authorities is key following natural catastrophes. This worked really well in Fort McMurray and should serve as a template for future events,” Grollimund said.
“At the same time, natural disasters in Canada can be much more challenging for the insurance industry than the Fort McMurray wildfire. For instance, a big earthquake affecting the Vancouver region would pose a significantly bigger challenge in terms of the number of affected homes, businesses and therefore claims. Much remains to be done to be ready to respond to such an event.”
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A potential event of the same or similar magnitude is becoming more likely because of climate change - but Canada’s preparedness hasn’t matched the rising threat levels.
“Unfortunately the true value of insurance reveals itself only after a big event such as Fort
McMurray,” Grollimund said. “While many homeowners impacted by the Fort McMurray fire did have property insurance, there remains a significantly larger protection gap for other perils such as flood and earthquake. For instance, only 3% of all homeowners purchase earthquake insurance in Quebec, leaving 97% of all homeowners exposed to the full financial impact of earthquake damage in that province.”
Insurers incurred losses of previously unseen magnitudes during Fort McMurray and the message is that it could happen again – but then that’s what insurance is all about.
“The insurance industry should strive to cover as much of the financial burden as possible following large catastrophes by narrowing the gap of uninsured property owners,” Grollimund said. “Helping societies to recover quickly after catastrophes by helping to finance reconstruction is a core purpose of the insurance industry. This requires proper quantification and compensation for the insured risk.”
