Sawmill explosion in B.C. hits beleaguered industry

An explosion and fire at the Lakeland Mills sawmill in Prince George, B.C. on Apr. 23 was the second such incident in four months and will contribute to an already difficult insurance market for lumber operators in the province.

The explosion killed one and injured 24 workers. No damage estimates were available at press time. The blast was similar to one that killed two people and gutted a sawmill in Burns Lake, B.C. in January.

These incidents will bring more challenges to a sector already hit hard by fire losses, reduced insurance capacity and higher rates. The sawmill and wood product manufacturing industry has a combined ratio of 150% and has already seen two major insurers exit the business – ACE INA in April 2011 and Lumberman’s Underwriting Alliance (LUA) in November 2011, according to Larry Grant, vice president of the forest practice division at Hub International.

“There are only a small number of insurance companies (or markets) that have any interest in this class of business,” Grant noted in a recent issue of Logging & Sawmilling Journal. “Over the years, large, high profile losses have been seen by the entire underwriting community. This, of course, has diminished their interest in working in this class of business, limiting the number of markets to a single digit percentage of the overall insurance industry.”

Grant added a number of fires at sawmills in 2011 prompted insurance companies to re-evaluate their commitment to the Canadian market. With ACE INA and LUA gone, “the remaining interested underwriters will participate at rates that are not remotely close to what we have seen in the past five to 10 years,” he noted.