Insurers predict Fort McMurray fire to be costliest disaster in Canadian history
...and that means Albertans can expect their rates to increase

calgarysun.com
May 13, 2016
By Geoffrey Morgan

Insurance rates in Alberta are likely to rise again, continuing an upward trend following costly natural disasters, following the devastating fire that burned through Fort McMurray.

A report released Friday by credit ratings agency Standard and Poor’s predicted that insurance rates in Alberta would increase following the fire, in part because there are more catastrophic losses claimed in Alberta from natural disasters than in other provinces.

The agency released a list of the 10 most expensive catastrophes in Canadian history, and events in Alberta make up seven spots on the list.

“The (Fort McMurray fire), in our opinion, would likely continue to reinforce the trend of rate increases, particularly for insured risks in Alberta more than other provinces,” Standard and Poor’s analyst Hardeep Manku wrote in a report published Friday.

The agency also predicted that the fire in Fort McMurray would be the most expensive insurance event in Canadian history, but insurance companies would be able to absorb the losses and make money in the long run, even though claims from the inferno would likely surpass the total bill for the Calgary and area flooding in 2013 and the Quebec ice storm of 1998.

Those two events were the most expensive catastrophes in Canadian history, the agency’s report said. The flooding resulted in $1.8 billion of losses and the ice storm in Quebec resulted in $1.5 billion in losses in 1998 - though that figure was not adjusted for inflation.

Standard and Poor’s did not provide an estimate for the total insurance cost of the fire that destroyed 2,400 homes and businesses in Fort McMurray. Research from the Bank of Montreal estimated the total losses in the northern Alberta city and region could reach $9 billion.

Another ratings agency, DBRS, predicted that the fire would be an “earnings event,” or an event that would generate money for banks, even though some of those banks own insurance companies as subsidiaries.

“While losses within the insurance business are expected to be higher relative to loan exposures, DBRS expects any liabilities to be easily absorbable through earnings,” the firm’s analysts said in their report released Friday.

Eventually, rebuilding Fort McMurray could generate opportunities for banks, according to DBRS. The agency’s report said “once insurance claims start being paid, they will likely be deposited at banks, bolstering deposit balances. Additionally, banks will finance the rebuilding efforts leading to loan growth.”