British Columbia (BC) is gripped in combat with its worst wildfire season in history. The province remains in a state of emergency as 772 wildfires larger than 0.01 hectares continued to burn as of midnight.
Thousands of people remain under constant evacuation alert and many have been forced to flee their homes as the fires have encroached close by.
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The exact losses (insured and economic) are yet to be totally calculated as the wildfires are still ongoing. However, Bill Gatewood, corporate vice president and director of personal insurance, Burns & Wilcox, said the insurance industry is well-placed to deal with the catastrophe.
“We have a situation where the industry is very overly capitalized, so there’s a lot of money and a lot of capacity,” Gatewood told Insurance Business. “As horrific as the BC wildfires are – particularly for the people who live in and around the province – from an insurance industry perspective, they won’t be much of a blip in terms of harrying the industry from a capital perspective.
“The BC wildfires alone wouldn’t do anything to harden up rates, raise premiums or put carriers in a precarious financial position. It’s absolutely terrible for the people involved but from an industry perspective, the impact won’t be that large.”
The insurance industry has been relatively catastrophe-free for around 10 years, until Hurricanes Harvey and Irma devastated parts of the US in the past two weeks. Gatewood noted the irony of describing an “overly capitalized” industry when he spoke to Insurance Business. No doubt the industry’s coffers will take a huge hit from Harvey and Irma.
Another reason for the healthy market is the strong amount of investment capital being pumped into it. When the stock market lost some attractiveness, people looked to the insurance industry as a fairly recession-proof place to invest money, according to Gatewood.
“An overly capitalized industry is in a strong position to pay claims,” said Gatewood. “When you have a catastrophic situation like the BC wildfires, paying claims is important, but responding well to the incident goes far beyond just being able to pay the customer.
“The most important thing the insurance industry does is helping people put their lives back together. It’s the entire claims process and value-added services that really count.”
There are things that insurance brokers can do for customers in wildfire-prone areas before a claim situation occurs. Making sure clients have adequate limits on their homeowners’ policy is key, said Gatewood. Brokers can also advise loss mitigation tactics – like brush clearing and tree trimming – and educate clients about cost evaluation and the wider economic impact of wildfires.
Gatewood said: “It’s really important for people who live in catastrophe-prone areas to have adequate amounts of insurance on their home so that, if the house burns down to the foundations, they have enough money to rebuild it and replace everything down to the last spoon in the kitchen draw.
“A household inventory is often worth a lot more money than people anticipate. People accumulate things over the years and don’t think about how much it would cost to go out and buy everything again. Therefore, making sure the house has the right limits on it and the clients have adequate contents limits, is a key thing for brokers to be aware of.”
Related stories:
SGI says wildfire evacuation expenses could be covered by insurance
Insurers grapple with the implications of BC’s wildfires
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