Alberta wildfires could be costliest catastrophe ever for Canada P/C industry

The ongoing wildfires that have hit the Northern Canadian city of Fort McMurray, Alberta could be the costliest ever catastrophe to impact the Canadian property/casualty market, according to AM Best.

The blazes, that have so far damaged or destroyed more than 1,600 homes and structures, could produce damage costs in excess of C$1.9 billion ($1.47 billion) – the figure of losses generated by the January 1998 ice storm in Quebec and the 2013 flooding in Southern Alberta.

Despite these substantial losses, many of the top homeowners’ and auto writers in Alberta have diverse national geographical and product profiles, and possess strong risk-adjusted capitalisation, comprehensive reinsurance programmes, and solid overall risk management capabilities, according to AM Best.

It said that while it is too early to determine any ratings impact, it is expected that these companies will “be able to absorb the losses without a material impact to their risk-adjusted capital positions.”

The rating firm claimed that it will take more time to assess the extent of impact on profitability and capitalisation measures on smaller, more geographically specific writers in the area with potential concentration and scale issues however,

The fires began in a mobile home park and spread rapidly, thanks to unseasonably high temperatures, low humidity, and strong winds, according to catastrophe modelling firm AIR Worldwide.

AM Best claimed that after a relatively benign catastrophe period in Canada over the last year and a half, this episode is another reminder of the damages a property and casualty writer can be exposed to and the need for companies to continue to focus on prudent and developing risk management.