Canadian Underwriter

What’s making it harder to estimate property Cat claims

February 17, 2021   by Greg Meckbach

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Recent price increases in building materials means it is harder than normal to predict the cost of repairing property damage, restoration experts say.

Restoration contractor Peak Services handled several thousand claims after the June 13, 2020, record hail storm in Calgary.

“A large portion of those claims were estimated in June and July,” said Jim Gibb, vice president of installation services at Peak Services, during a recent CatIQ Connect webinar. “There have been five price increases on a lot of those since then.”

A combination of factors is affecting pricing and supply of building materials, said Colin Young, assistant vice president at engineering consulting firm J.S. Held. The firm is now starting some projects for which pricing was estimated in May of 2020. As a result of price increases, J.S. Held needs to put in change orders on some projects that were priced last year, Young said Feb. 11 during The Impacts of the Supply Chain on the Insurance Industry Panel, hosted online by Catastrophe Indices and Quantification Inc.

“We are starting to put disclaimers on our estimate. They are really only valid for 30 to 60 days,” said Young.

Lumber prices are being affected by a number of factors, including pests that damage trees and wildfires. “2020 was a bad year for wildfires,” Young said. Last year’s wildfires may not have destroyed a lot of property, he said, but “acreage-wise, a massive amount of forest was lost due to fires.”

After COVID-19 was declared a global pandemic in March 2020, some lumber mills reduced or shut down operations, added Young.

“In March, when everything shut down, all the lumber mills stopped cutting lumber. If you stop any business for any length of time, it takes exponentially longer to catch up to where you were before. So there is a huge lag because of that. Even when they did start back up, they had to maintain social distancing, so there [are fewer] people producing the lumber.”

The June 13, 2020 hail storm in Calgary cost the industry about $1.2 billion, making it Canada’s fourth most expensive insured catastrophe.

With that hail damage, individual repair costs may be higher than originally anticipated, Gibb suggested during CatIQ Connect’s February webinar.

“I would venture that the insurance carriers are going to receive a lot of phone calls [this] spring from customers [who agreed to cash settlements] with the intention of [doing their home] repairs themselves and realize that the funds aren’t there like they thought [they] were. So it is going to be an interesting spring for sure and hopefully that doesn’t dig into everybody’s profitability,” Gibb said of the aftermath of the June Calgary hail event.

There has been a shortage of some raw materials, such as resins that go into making vinyl siding and some materials that go into shingles. As a result, vinyl siding prices went up rose more than 35% in one season, said Gibb.

“Many of the insurance companies started offering additional incentives to upgrade shingles to a hail impact-rated shingle and none of the distributors were ready for that,” said Gibb, who has worked in construction for more than 25 years.

“One thing I have never ever seen is a ‘temporary’ price increase ever be reduced,” he said. “So, [as for] the increases that we saw in 2020, as much as you would like to think that raw material prices will come back down, history shows that they typically don’t.”

Lumber is starting to be an attractive target for thieves, said Young. In the past, suppliers typically would drop lumber off at a site and walk away from it.

“Now you are going to have to secure it because everyone is going to want it. Lumber is the new copper.”

Other factors affecting lumber demand include rioting and looting in 2020 in the United States (prompting shopkeepers to board up windows), multiple hurricanes hitting the U.S. Gulf Coast in 2020, and a demand from Canadian do-it-yourselfers.

“If you have walked into a Home Depot in the last year and walked down that lumber aisle, things were pretty scarce,” said Young. “Not only were prices scary, but the aisles were empty. If you have aspirations to build a deck because it is the only place you can hang out because of COVID, good luck with that. If you did find it, it was ridiculously priced.”


Feature photo courtesy of

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