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Insurers should think more seriously about wildfire risk to property


October 9, 2014   by Greg Meckbach, Associate Editor


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Canadian insurers need to “start thinking” about the risk of property losses from wildfires in Canada and should consider lobbying regulators to require hurricane straps on new homes in order to reduce wind loss, speakers suggested Wednesday at the Annual Engineering Insurance Conference.

Before May 2011, the Institute for Catastrophic Loss Reduction (ICLR) was warning insurers that Canada would some day have a wildfire with insured losses of $1 billion or greater, suggested Glenn McGillivray, ICLR’s managing director.

“Slave Lake was pretty damn close to that,” McGillivray said of the Alberta town that experienced about $700 million in insured losses arising from a wildfire May 16, 2011. “We really have to start thinking about wildfire.”

He made his remarks during a presentation at AEIC, part of the Canadian Boiler & Machinery Underwriters Association (CB&MUA).

“Everybody I talked to (after Slave Lake) said, ‘I never saw that one coming’ and we deal with a wildfire expert at ICLR who said to me once, ‘Glenn, there are thousands of Slave Lakes across the country,'” McGillivray said.

He added 2013 was the fifth year in a row, in Canada, where total insured losses from catastrophes exceeded $1 billion.

“Some of the changes that we are seeing out of this is the homeowner’s product is no longer the cash cow any more,” McGillivray said, suggesting that in some years in the past, loss ratios for home insurance were 18 points lower than auto. “You knew you were going to get wrecked on auto. If it was a profit it was a small one. You always knew that the homeowner’s product was going to bail you out and that is not the case anymore.”

McGillivray showed charts listing major catastrophe losses in Canada. The “big event so far” in 2014 was the hail storm Aug. 7-8, which is estimated by Verisk Analytics Inc.’s Property Claims Services unit to have caused about $450 million in insured losses in and near Airdrie, Alta. Ontario catastrophes in 2014 included a tornado – measuring 2 on the Enhanced Fujita scale (which essentially means the wind speed was between 180 and 220 kilometres per hour) – that touched down June 17 in the community of Angus, about 100 kilometres north of Toronto.

Some homes in Angus were damaged because they were not built to code, suggested Dr. Gregory Kopp, a civil and environmental engineering professor at Western University in London, Ont. Kopp’s areas of expertise include the effect of wind on low buildings. He is a director of Western’s Boundary Layer Wind Tunnel Laboratory and lead researcher at the Insurance Research Lab for Better Homes in London – which ICLR uses for its research.

Kopp said some roof trusses in Angus were discovered to have one nail only, though the building code requires three nails to connect each roof truss to the top plate of the walls.

At least 100 homes were damaged in Angus.

“A lot of these failures, we believe, were due to inadequate construction, lack of enforcement of code and lack of proper connections,” Kopp said during AEIC. “When you talk to people (after) a tornado, God gets blamed because it’s an act of God but I think this is an act of man doing something inadequately.”

Nails in roof trusses “play a big big role” in resisting the lift force of wind, Kopp suggested.

Adding hurricane straps to connect roof trusses to walls can also increase the strength, Kopp suggested, because in order to remove the roof truss from the top plate of the wall, the force of the wind would have to cut the nail.

“It is difficult to shear a nail but easier to pull it out,” he said, but added the National Model Building Code of Canada does not specify hurricane straps – which Kopps says are available for about 60 cents each from a hardware retailer.

“If this industry starts lobbying, I think we can get this in the code,” he said. “In the United States, where in some areas they don’t even want building codes — because that’s too much of an intrusion — they have requirements (for) hurricane straps and 2.5 inch nails.”

Canadian building codes generally require two-inch nails, he noted.

“Going from a 2-inch nail to a 2.5 inch nail roughly doubles the strength,” he said. “How much does that cost per house? Less than a case of beer.”

Kopp showed photos from the aftermath of two tornadoes that hit Vaughan, which borders Toronto to the north, on Aug. 20, 2009. That event damaged 500 homes – 25 of which had to be bulldozed – and caused insured losses of about $80 million, McGillivray told Canadian Underwriter earlier.

Kopp and some of his students investigated property damage in Vaughan in 2009.

“If we had hurricane straps on those houses, a lot of the damage would have been eliminated or reduced,” Kopp said Oct. 8 at AEIC. “When we talk about designing for tornadoes, people think we are crazy, but our analysis shows — based on full-scale testing, field observations and wind tunnel work —that we can, we think, actually keep roofs on houses with tornadoes as strong as we had in Vaughan or in Angus.”

ICLR persuaded the builder of a Calgary home to add hurricane straps, Kopp said, noting the total cost was estimated at less than $200.

“Builders don’t like putting these in,” he said. “One of my colleagues at the wind tunnel was building a new house, he wanted them put in, the builder (quoted) $10,000. That’s ridiculous, so my colleague went on the weekend and he nailed them in himself in a couple of hours. It’s literally two hours and 50 bucks.”