Canadian Underwriter

Burnt Offerings

August 1, 2016   by Angela Stelmakowich, Editor

Print this page Share

The devastating impact of the wildfire in Fort McMurray — made real by its power and breadth — is hard to ignore. But the ferocity with which the fire savaged hundreds of thousands of hectares of forest, rural land and the area around a key oilsands centre does not mean the risks and effects of future unwelcome, but likely, wildfires cannot be mitigated.

Decisions will need to be made, some necessitating amendments to existing rules, many demanding resources, and all requiring a change in attitude around what makes good risk management sense and what does not.

Burned-out homes and vehicles are seen in the Timberlea neighbourhood as residents re-enter fire-ravaged Fort McMurray, Alta., on Thursday, June 2, 2016. THE CANADIAN PRESS/Codie McLachlan

Burned-out homes and vehicles are seen in the Timberlea neighbourhood as residents re-enter fire-ravaged Fort McMurray, Alta., on Thursday, June 2, 2016. THE CANADIAN PRESS/Codie McLachlan

Every catastrophe, disaster or emergency leaves in its path lessons learned that could serve as a launching point for additional improvements. Depending on the event, some lessons are completely new; others are persistently familiar.

Natural catastrophes that seem to be occurring with greater frequency and severity – which some link to climate change – will not stop because they destroy, damage or displace. Without change, they will continue to contribute to loss for everyone from individuals to the property and casualty insurance industry, communities and governments of all levels.

While there may be no stopping these events, sources suggest that with respect to wildfires, tools and measures are available to help prevent or greatly reduce the risk of losses that cascade down the line when fire spreads from forest to community.

The hopeful solution revolves around a bit more clarity, a few more requirements and an openness to understanding that change can prove beneficial in the long run.


Things are progressing in the wake of the Fort McMurray wildfire, but plenty more will need to be done over the coming months, perhaps years. Beyond recovery and helping both individuals and businesses return as close as possible to where they once were, now is also the time to start figuring out how best to prevent (if possible) or mitigate similar damage and disruption in future.

At least two reviews meant to make real that objective are now under way.

One such exploration will consider Alberta’s Ministry of Agriculture and Forestry response to the wildfire, with a final report expected to be delivered to government by the end of the year. The review will look at the ministry’s wildfire preparation and readiness up until the end of May and the steps taken to respond to fight the massive blaze.

Another review was carried out by Alan Westhaver of ForestWise Environmental Consulting Ltd., commissioned by the Institute for Catastrophic Loss Reduction (ICLR) to conduct a forensic investigation.

Both direct flame and radiant heat were not seen as the causes of ignition in the vast majority of homes Westhaver physically visited, he reported in presenting partial results during an ICLR webinar in early July.

“I think embers were the constant in every home visited,” he noted, adding that an interim report will be issued soon.

Embers have become a primary focus of research and that holds for Fort McMurray, said Westhaver, who co-chaired the project that developed the community FireSmart manual. “The current understanding is that, based on monitoring large wildfires, or interface fires, 50% to 90% of all ignitions are the direct result of embers at that interface zone.”

A wildland urban interface (WUI) fire is the point where fuel being consumed by a wildfire “begins to switch and include fuels from the structural or the urban environment,” he explained.

Of concern are ignition sites, a combination of miscellaneous combustibles, like “the hundreds of different kinds of items that people have on, under and around their homes and their properties” and ember accumulators. “The science is telling us that these zones where embers accumulate are increasingly important in the ignition of homes,” he said.

Conflagration is a destructive fire that spreads beyond any potential barriers, causing catastrophic losses. “As far as moving from structure to structure, incredibly dangerous, incredibly intense and this is at the point in time where the majority of homes and structures are lost throughout this disaster sequence.”

The only possible place to break this cycle, Westhaver said, “is at that point where fire is making the transition from forest fuels to homes, and that’s done by making homes more resistant to ignition.”


Glenn McGillivray, managing director of ICLR, says the institute regards FireSmart as the premiere wildfire damage prevention program in Canada and its use “dramatically increases” the chances that a property will survive a wildfire.

The disciplines of FireSmart, designed to help address the threat of wildfire, are education, vegetation management, legislation and planning, development considerations, interagency co-operation, emergency planning and cross training.

Among other things, the approach calls for three concentric priority zones to be established around a building: at least 10 metres away, so any vegetation will not support fire of any kind; from 10 to 30 metres away, with any vegetation only supporting fires of lower intensity and rate of spread; and from 30 to 100

metres or more away.

“While there are other things to consider, like fuels management in the nearby forests, urban planning and building code, risk management on private property is key,” McGillivray says.

“If nothing is done with the former, but a property is properly FireSmarted, you still increase the chances of survival by a considerable amount,” he contends.

Bill Adams, vice president of Insurance Bureau of Canada’s (IBC) Western and Pacific Region, noted during a media briefing “these are the kinds of things that, unfortunately, too often take events like this (Fort McMurray) for people to recognize there are some very pragmatic things that can be done to eliminate the risk. There’s always going to be a level of risk, but to mitigate it as much as possible.”

Anne Chalmers, vice president of risk and security, and chair of the Materials Stewardship Committee, at Teck Resources Limited, agrees there are things that can be done very close to home. For example, within the first 10 metres of a residence, shrubs, woodpiles and trees should be removed, and if there is grass, it should be mowed and watered, Chalmers says.

Roofs should be free of combustible debris and materials that could provide fuel for airborne sparks or embers, she notes. “Untreated wooden shakes and shingles provide no resistance and are ideal fuels for contributing to a fire.”

Sources cite a number of preventive measures, including the following:

  • keeping properties clean and clear of forest litter, such as branches, twigs, leaves and needles;
  • not storing flammable materials, including firewood and propane tanks, near structures;
  • not locating wood sheds or fences next to structures; and
  • being selective about the use of landscaping vegetation and not using wood mulch.

In addition, Kelly Johnston, executive director of the Partners in Protection Association, says “use, topography and surrounding wildland environment will influence the vulnerability of a structure.”

Asked if measures should change if a property is personal or commercial, McGillivray notes “some commercial properties differ greatly from residential properties. Commercial properties often have large firebreaks around them, and often have less flammable structures.”

For commercial structures, Dana Terry, deputy chief, support services for Lethbridge Fire and Emergency Services, says things to consider in fire response include the type of business, presence of flammable or hazardous materials, fencing or anything that hampers access, types of storage facilities and the presence of vehicles or equipment.

Chalmers’s advice? “Know what business your neighbour is in.”

Darius Delon, chair of the RIMS Canada Council, notes “from an emergency response perspective, each building owner should have a set of pre-determined strategies for different responses.”

For example, the threat to a commercial building may be from direct flame or smoke in the air, says Delon, who recently became one of six risk managers in Canada to achieve the new RIMS-CRMP certification. For smoke-filled outside air, the protocols could include shutting off fresh air intakes and dampers, and closing windows, to prevent smoke from circulating inside and causing damage.

By having pre-determined responses, “a building operator would just have to go through the list and actually do those five or 10 things,” before evacuating, says Delon. “It can’t be a debate; it can’t take an hour to figure out what those five or 10 things are in the time of crisis.”

Overall, once a fire is going, “in a dire situation, buildings can be bulldozed to create a fire break if fire has breached other defences,” Terry explains. “This was used in Fort McMurray to good effect. You lose some houses in order to save a neighbourhood.”


“There seems to be a lot of focus on response to wildfire events,” says Shayne Mintz, Canadian regional director of the National Fire Protection Association. “Lessons learned for Slave Lake, Kelowna and now Fort Mac all show that with proper adoption of FireSmart, much of a community’s loss can be reduced, if not totally prevented,” Mintz contends.

Citing Alberta’s High Intensity Residential Fire (HIRF) code, McGillivray says homes built close together require certain measures to prevent spread of fire should one home ignite. “The homes rebuilt in Fort McMurray will have to follow the HIRF code (as those rebuilt in Slave Lake did). This is a good first step,” he says.

“We have already started to develop our own FireSmart program, which addresses some of the items identified in Slave Lake,” Terry reports. “It is very much about preventive measures that reduce the risk of a conflagration from occurring,” he says, including such risk management measures as limiting fuel loads, promoting the use of fire-resistant plants, trees and shrubs, developing green spaces as fire breaks, and using prescribed burns to lessen the spread of fire in a particular area.

“Nowadays, when all homes are being built close together, you need to think of conflagration exposure,” Delon says.

“It’s also a responsibility of municipalities, the province and federal government to look at strategies,” he says. If climate change is increasing the threat of fire, “what we want to do is have a new national strategy for new construction and, perhaps, old construction,” he says.

“The oil companies have large gravelled areas that helped to protect their vital infrastructure and facilities,” Terry says. “That would be something future developments could take into account.”

After the Slave Lake wildfire – with insured losses of about $700 million – an independent review resulted in 21 recommendations related to wildfire prevention, preparedness and capacity, communications, organizational and incident management, post-wildfire business resumption, policy and legislation, and research and development.

In announcing the Fort McMurray response review, Alberta’s Ministry of Agriculture and Forestry notes the recommendations all have been implemented or are continuing to be implemented.

“The time has come for our country to take a more disciplined and sustained approach to how we help people prepare for fire and flood,” Don Forgeron, IBC’s president and chief executive officer, said recently. This will help to minimize costs to taxpayers and equip homeowners for future risks, he noted.

Even before Fort McMurray, Canada’s 2016 wildfire season had already surpassed the average hectares burned in recent years, Carolyn Rennie, managing director of Catastrophe Indices and Quantification Inc. (CatIQ), said at an industry event this spring.

As of May 23, Rennie reported, more than three times as many hectares had been burned than the average. Including Fort McMurray, “we’re pushing almost eight times as many hectares burned than average,” she said at the time.

“With very few exceptions, catastrophic wildfires occur when three conditions are met simultaneously: dry heat maximizes the volatility of vegetation; extreme winds, which can drive the propagation of a fire through that vegetation, occur; and a fire ignites close to a moderately or heavily populated area,” AIR Worldwide principal scientist Tomas Girnius reported in early May.

Researchers from McMaster University’s School of Geography and Earth Science have cautioned the world’s peat bogs are being converted into fuel-packed fire hazards that can burn for months. Dried peatlands fuelled the 2011 fire in Slave Lake and the Fort McMurray fire also burned through a dried peatland along the only highway in and out of the town.

They note that in northern forests, black spruce trees have proliferated on peat bogs. The trees block sunlight, killing the living layer of moss and sucking the moisture out of bogs, not only turning the peat material itself into a fire hazard, but also accelerating wildfires.

“Scientific studies based on climate modelling imply that climate change in the future will lead to less snow pack and more extreme dryness, particularly in southwest Canada,” Peter Höppe, head of geo risk research for Munich Re, said in May. “Global warming increases the fire hazard in many regions in Canada and will result in a longer fire season.”

Adams said of the Fort McMurray wildfire during the media briefing, “In retrospect, this was an event that was if not predictable, certainly expected, when you build so close to a boreal forest.”


With wildfire events likely to continue, so, too, are the associated damages and costs. Recent damage estimates for insurers and reinsurers are shaping up to be significant, indeed. For example, those specifically for the Fort McMurray wildfire have included $127 million, $105.4 million and $104.0 million.

Looking at Canada’s p&c industry as a whole, figures compiled by CatIQ and released by IBC estimate insured property damage at $3.58 billion. This is more than twice the amount of the 2013 southern Alberta flood, which spurred $1.7 billion in insured losses.

Of the $3.58 billion, 62% relates to personal property, 33% to commercial property, including business interruption (BI), and 5% to auto, Rennie said at the media briefing. There are 27,000 personal property claims, with an average cost of $81,000; 12,000-plus auto claims, averaging $15,000; and 5,000 commercial insurance claims, averaging more than $250,000, she noted.

Beyond insured losses, though, are losses borne by governments (taxpayers, ultimately) and the economic impact.

Statistics Canada reported in July that the Fort McMurray wildfire pushed the country to its worst one-month performance, with real gross domestic product (GDP) contracting 0.6% for May, since GDP fell 0.8% in March 2009.

Impact Forecasting earlier announced that the overall direct economic impact of the wildfire is expected to approach US$5 billion once all attributable losses are realized.

“Slave Lake saw some insurers owning a large percentage of the impacted properties,” says Paul Franc, vice president and general manager of DMTI Spatial. “Location intelligence can help avoid situations where the book of business over-rotates on a specific geography, and highlights areas for potential re-insurance to limit exposure,” Franc suggests.

Whoever bears the cost, rebuilding will take time. “In Slave Lake, where there were 400 or so homes destroyed in that wildfire, it took some people up to two years before they had a rebuilt home,” Adams said during the briefing.

In Fort McMurray, 2,400 individual homes and multiple units were destroyed.


Len Cheryk, manager of integrated risk management for the City of Lethbridge, says he expects there can be a wide range of potential claims related to personal, commercial and government property.

These can include BI claims for loss of profits during and post-event until new construction has been completed, Cheryk says. “Some policies will pay until profits reach the same level that they should have been had no fire occurred.”

Other possible claims could relate to debris removal and clean-up costs of damaged and undamaged property to facilitate new, repair or replacement construction; crime from looting; contents replacement; extra and expediting expenses for businesses and additional living expenses (ALE) under homeowners or tenants package policies; liability for allegations of negligence; evacuation by order of a civil authority; and smoke damage under property insurance.

Cheryk says he expects commercial properties will witness costs related to damage, clean-up and BI. “I would say actual damage costs would be approximately 65%, clean-up would be 10% and BI would be 25%.”

Delon notes that, depending on the structure, cleaning a building could cost 20% of the overall value of the building.

But what influence, if any, would there be on claims should it be determined the fire was deliberately set? From an insurance standpoint, Cheryk says, “if accidental, third-party liability insurance policies could come into play.”

The view of Alex Denslow, a partner with the Insurance & Reinsurance Group at CMS Cameron McKenna LLP in London, is the Fort McMurray wildfire has the potential to give rise to “much more complex issues for the reinsurance market than may appear at first sight,” particularly surrounding issues of causation, aggregation and contingent business interruption (CBI).

If caused by “human intervention,” Denslow noted in a briefing, it is important because “the cause of a loss sets the framework against which cover is triggered, and aggregation assessed.”


“Alberta is ground zero for large Cat losses in Canada,” McGillivray says, pointing out that seven of 10 of the biggest such losses have occurred in the province. With perils ranging from flooding to hail, wind and wildfire, “there is a particular need for mitigation programs in the province with an emphasis on the need to get owners of private property to better understand what they need to do to protect themselves and their assets,” he contends.

Delon notes that building codes are a minimum. The choice can be made to go beyond that with a view to making structures more resilient, he says.

Johnston’s view is Canada’s building code “and, subsequently, the provincial building codes in each province, require updating to include WUI mitigation standards for municipalities to enforce.”

Adoption of strengthened building codes in wildfire-prone areas similar to those in effect in areas prone to seismic events is recommended, says Mintz. “In the rebuild and go-forward from Fort Mac, Slave Lake and Kelowna, there needs to be more focus on properly planned land development, adequate attention to strengthened building codes and educational outreach to the public,” he says.

“ICLR is advocating that Canadian insurers take up our ‘Insurers Rebuild Better Homes’ program,” which identifies best practices for the design and construction of homes to reduce the risk of loss and damage from several natural hazards, including wildfire, says McGillivray. Many program elements “add only negligible costs to the rebuild,” he notes.

“One additional requirement to ensure risk mitigation efforts are as effective as possible is in regards to data openness,” Franc says. To make full use of location analytics, he notes that it is important to utilize base data like addresses at a national level to use for portfolio risk aggregation analyses to understand total losses after an event such as a wildfire.

“In the future, insurers and municipalities could also look to share claims data – to see where particular risks lie (such as overland flooding and sewer back-up flooding),” Franc says. “This could help to inform local policies and building codes in these associated areas.”

McGillivray regards it as “blatantly not true” that nothing can be done to mitigate the impacts of events like the Fort McMurray wildfire. Many homes were left standing “in neighbourhoods that were otherwise decimated,” he says.

“We think we’ve gone beyond the time where we should allow these events to take place and for us, as an industry, and governments to move in to try and help people recover. We need to reverse that trend and we need to put more resilience in at the front and prevent the impact of these events,” Adams said.

Having in place protocols is not just about “mitigating damage that’s related to property values. It’s mitigating damage from property, liability, time, business interruption, all the different aspects that are insurable, but also all the aspects that are not insurable,” Delon says.

Whatever the event – a wildfire, a flood, an active shooter – “you can’t think it will never happen,” he emphasizes. “Resilience is based on planning.”

Learning from disasters is “critical if we’re going to prevent these catastrophic losses in the future,” Westhaver added.