Wildfire damage in Jasper could make it one of the most expensive wildfires in Canadian history, costing the insurance industry up to $700 million, according to a global credit rating agency.
Morningstar DBRS analyzed the potential tally of the wildfires in Jasper on insurance companies, saying it could surpass the costs of the 2011 Slave Lake wildfire.
“We believe that potential insured losses could come close or even be higher than those incurred in the Slave Lake wildfire in 2011.”
The Slave Lake wildfire cost $700 million when adjusted for inflation, the report authors said. It comes second only to the 2016 Fort McMurray wildfire, which cost $4.4 billion, according to the report.
Alberta Premier Danielle Smith has said that 358 of the 1,113 structures in Jasper were lost in the fire. These were homes and businesses.
“Jasper National Park is one of the most popular tourism destinations in Canada, which may cause insurers to face additional business claims in respect of commercial building and business interruption losses,” the report said.
However, DBRS said wildfire damage for 2024 should be manageable for the insurance industry.
“Overall, the potential insured damage caused by the 2024 wildfire season should be manageable for Canadian insurers, but if extreme weather events continue to happen more frequently in 2024, Canadian P&C insurers may start facing earnings pressure,” the report authors wrote.
They also noted there has been an increase in severe weather-related losses, with wildfires becoming more of a concern since 2021.
So far in 2024, wildfires have scorched about 2.4 million hectares. The historical average is 2.1 million, the report says. However, it notes that in 2023, 16.5 million hectares were consumed by wildfires.
The insurance industry saw severe weather-related losses in 2023 add up to $3.1 billion.
DBRS said the industry is “well-prepared” for wildfire events, noting that it has a “strong” capitalization, diversification, and reinsurance risk transfer strategy.
“The potential insured damage caused by the 2024 wildfire season should be manageable for Canadian insurers, but if extreme weather events continue to happen more frequently in 2024, Canadian P&C (property and casualty) insurers may start facing earnings pressure,” said Steve Liu, assistant vice president at Global Insurance & Pension Ratings.
