Wildfire risk under-priced in Canadian market: ICLR

The insurance industry “dodged a bullet” in 2009 with wildfire losses, but it currently has its “head in the sand” when it comes to pricing this risk, said Glenn McGillivray, managing director of the Institute for Catastrophic Loss Reduction (ICLR).
McGillivray spoke on global changes and catastrophic loss at the Ontario Mutual Insurance Association’s conference in Toronto on Mar. 25.
Wildfires in the Kelowna, B.C. area in 2009 barely caused a dent in the insurance industry’s claims costs. According to the Insurance Bureau of Canada (IBC), only four homes were destroyed in the 2009 fires.
Wildfires in the region in 2003 resulted in 3,385 insurance claims totalling $200 million.
“We dodged a bullet last season in Kelowna, but I think if it weren’t for the ‘Big Burn’ in 2003 it would have been much worse,” McGillivray told delegates.
He recalled a recent conversation about wildfire risk with a major reinsurer. “They said it was just a ‘blip on the screen and we don’t think that [wildfires on the scale of 2003] can happen again.’”
That kind of thinking can only spell trouble for the industry, McGillivray maintained, adding that Ontario and Quebec’s respective cottage countries are also at risk. The value of properties in these areas continues to climb as high as multi-million dollar vacation homes.
“In Ontario it’s common to see a cottage worth $4 or $5 million, and it doesn’t take many of those to get a really big loss,” he said.
“I think a lot of companies are basically giving away wildfire risk and not properly loading for it.”