A pile of burnt cars remain after a massive wildfire swept through Jasper, Alta., on July 26, 2024.Amber Bracken/Reuters
The devastating wildfire in Jasper, Alta., will be another blow to property and commercial insurers that cover increasingly common natural disasters, but industry experts say they expect insurance companies will absorb the financial blow and continue to insure clients in the area.
Victor Adesanya, vice-president of global insurance and pension ratings at Morningstar DBRS, a global credit rating agency, said damages from the Jasper fire are estimated to reach $700-million, a figure that is similar to the 2011 Slave Lake fire in Alberta.
Experts said the fire will likely lead to higher insurance premiums for both homeowners and commercial businesses as wildfires increasingly put communities in danger, but property owners are likely not at risk of being uninsurable after the event. However, Morningstar DBRS said further wildfire events this year could begin to put serious earnings pressures on insurance companies.
“The losses will be significant for the insurance companies,” Mr. Adesanya said.
“In the years to come, this could impact insurance premium charges for all policy owners.”
Alberta Premier Danielle Smith said at a press conference Friday that one-third of the structures in Jasper suffered “total or partial loss.” Parks Canada said critical infrastructure including hospitals, school and water facilities remain intact thanks to firefighting efforts.
The protection of those facilities will be imperative in reducing the overall insurance cost of the wildfire, which quickly overwhelmed firefighters and at one point had flames towering 100 metres over treetops.
Rob de Pruis, national director of consumer and industry relations for the Insurance Bureau of Canada, said the protection of critical services will allow people to re-enter the community more quickly.
“It really makes a big difference because in order for re-entry you need to have a community that has the necessary services to bring people back,” said Mr. de Pruis, who said the protection of groceries, pharmacies and other essential businesses will also speed up the recovery.
The charred remains of a hotel in Jasper, Alta.Amber Bracken/Reuters
If initial estimates are correct, the Jasper fire will be one of the most expensive fires in recent years. Its estimated $700-million loss compares with roughly $480-million in losses from last year’s McDougall Creek fire in West Kelowna, B.C., which burned multiple homes to the ground. Both blazes are dwarfed by the 2016 Fort McMurray, Alta., fire, which topped $4.4-billion in damages.
A challenging aspect in Jasper is the large number of businesses in the tourist centre, which will lead to large commercial insurance losses for lost income and business interruption.
Some businesses have already reported that their facilities have been mostly destroyed. Anastasia Martin-Stilwell, a spokesperson for the Fairmont Jasper Park Hotel, said that parts of the large historic hotel have also been damaged by fire.
In a report, Morningstar DBRS said it believed Canadian insurers will be able to withstand the financial blow of the Jasper fire because of the diversification in their business and because of their reinsurance strategies.
Reinsurance, which is insurance that insurers themselves use to protect themselves from large-scale disasters, could itself become another cost pressure on Canadian providers, because reinsurers will likely increase the premiums they charge.
One reason Mr. de Pruis is confident that Canadians will still be able to insure their homes against fire is that fire protection has been a standard part of home insurance for decades, meaning there is extensive data and actuarial information on setting premiums for the coverage.
That’s in contrast to flood insurance, which was introduced less than a decade ago. Many Canadians have found themselves unable to insure their homes against flooding.
Mr. de Pruis said the country has to mitigate the growth of wildfires to ensure that Canadians can continue to access property insurance. Long-term strategies include better forest management and using fire-resistant materials and building practices. He said some insurers are providing funds for homeowners to rebuild with more expensive fireproof materials to prevent future damage.
This year, Canadian insurers have also begun to use contracted fire-prevention services to reduce property damage. Insurers such as Intact and Aviva have partnered with Wildfire Defense Systems to set up sprinkler systems, move flammable outdoor furniture and apply fire retardant on homes.
Wildfire Defense Systems was mobilized during the Jasper wildfire, but spokesperson Scott Eskwitt said it is too early to provide information about their field operations.
