Canadian Underwriter

Okanagan Lake area wildfire could cost the industry nearly $80 million

September 24, 2021   by Greg Meckbach

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An interior British Columbia wildfire this past August, which forced the evacuation of more than 1,000 properties, will cost the industry an estimated $77 million, the Insurance Bureau of Canada said Thursday.

The White Rock Lake fire began on Aug. 2, grew to more than 833 square kilometres and forced the evacuation of 1,316 properties west of Okanagan Lake, The Canadian Press reported earlier.

Affected areas include Killiney Beach and Monte Lake, between Vernon and Kelowna, roughly half-way between Vancouver and Banff, Alta.

The White Rock Lake disaster is estimated to have caused $77 million in insured damage, according to initial estimates from Catastrophe Indices and Quantification Inc. (CatIQ), IBC said Thursday in a release. That is on top of $78 million in insured damage from the Lytton wildfire, which occurred in late June about 200 kilometres to the west of the August White Rock Lake wildfire.

The Lytton and White Rock Lake wildfires gave rise to about 300 and 800 claims respectively, IBC says, quoting CatIQ. Most of those were residential property.

Wildfire caused Canada’s most expensive ever natural cat, when measured by insured losses, in 2016. That was when the entire Alberta city of Fort McMurray was evacuated. The disaster was estimated to have cost the industry about $4 billion. Although floods in southern Alberta in 2013 caused an estimated $6 billion in economic loss, the 2013 event was Canada’s third most expensive nat cat because only about $2 billion of it was insured. The second most expensive nat cat ever was the 1998 ice storm.

Canada ranked third, behind the United States and Indonesia, in an earlier Lloyd’s report listing the countries with the greatest amount of economic damage, from wildfire, from 1990 through 2012.

In 2011, a wildfire in Slave Lake, Alta. cost the industry about $591 million, A.M. Best Company Inc. reported earlier.

“Canada must prioritize its work on a national adaptation strategy including a high-risk flood insurance pool to address climate-related disasters such as extreme heat, wildfires, floods, windstorms and hail. Increased collaboration across the public and private sector collaborate is essential to defending Canadians from these events,” IBC said Sept. 23 in its release on the White Rock Lake wildfire.

Canadian Underwriter earlier asked Lloyd’s Canada president Marc Lipman whether Canada should have a public-private partnership to reinsure properties exposed to risks such as wildfire, earthquake, flood, pandemic or any kind of ‘black swan?’

“What is clear is that some sort of partnership between the insurance industry and government will be vital to respond to widespread and catastrophic losses,” Lipman said last summer in an interview. “For example, if you think about the global COVID-19 pandemic, there was no way that the insurance industry could have responded to that on its own. The global non-life insurance industry has about US$2 trillion in capital standing behind it, to pay all of its claims. The International Monetary Fund has recently estimated that governments injected more than US$14 trillion into the global economy in 2020. So, the insurance industry cannot do it alone. I think the industry can be a critical partner with government.”

When assessing wildfire risk to insurers, it is different from earthquakes and hurricanes and convective storms, said Michael Young, vice president of product management at catastrophe modelling firm Risk Management Solutions (RMS) Inc., during an earlier event hosted by Catastrophe Indices and Quantification Inc. (CatIQ).

On the one hand, earthquakes and hurricanes tend to affect large areas.

“But wildfires are actually a type of phenomenon that is hyper local,” Young said during Wildfire Science & Management: Modelling Update, a virtual panel hosted in late 2020 by CatIQ.

“Most people intuitively think, ‘Godzilla came in and stomped on top of everything in that footprint,’ but there is actually a survivability associated with that.” By that, Young means it often turns out that 30 to 60% of the structures inside a wildfire footprint survive.

During New in Catastrophe Technology & Modelling, hosted by CatIQ, Young gave several examples of factors affecting wildfire risk. Those factors include roof cover materials, whether or not roof vents are protected and whether or not the owner has removed all burnable vegetation within five feet of the building.

Feature image: Burnt trees are seen in an area where numerous structures were destroyed by the White Rock Lake wildfire. THE CANADIAN PRESS/Darryl Dyck

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