The Property Claim Services (PCS) business unit of Verisk Analytics has issued a preliminary estimate of insurance industry losses from the recent Fort McMurray, Alberta Canada wildfires, putting a figure of C$4.6 billion to the event, which is approximately US$3.52 billion.
The initial estimate from PCS includes losses from residential and commercial property, auto physical damage and also business interruption, that have been reported by insurers to PCS. We’re told that the estimate factors in both property and business interruption losses suffered by the local oil sands industry as well and that only losses from Alberta are included.
At roughly US$3.52 billion the estimate currently sits near the lower end of the insurance and reinsurance industry loss estimate issued by fellow Verisk company, risk modelling firm AIR Worldwide, which estimated that the Fort McMurray wildfires would cause an industry loss in a range of US$3.4 billion to US$6.9 billion.
PCS insured loss estimate data is used widely in the insurance, reinsurance and insurance-linked securities (ILS) sectors for insight and also as triggers for industry loss based risk transfer transactions, such as catastrophe bonds and industry loss warranties (ILW’s).
Sources told Artemis that there are some Canadian ILW’s in play which could be threatened by the losses from the Fort McMurray wildfire, but at this stage we have no information to confirm what level of industry loss any triggers would have been set at, or whether PCS data would have been used in these transactions.
However, as we wrote previously, triggers for ILW’s covering all natural perils in Canada can be seen around the $5 billion or $10 billion mark, but one ILW broker told us that triggers as low as $2 billion or $3 billion have been seen before, which would put this loss into that region.
With providers of reinsurance and retrocession expected to take the lion’s share of the losses from the Fort McMurray, Canada wildfires, some estimating as much as 70% or $2 billion to $5 billion of the loss would be passed to reinsurance capital providers, the initial estimate from PCS would suggest that somewhere around $2.5 billion being passed to reinsurers and any exposed ILS capital providers.
It’s important to note that this is an initial estimate. The level of complexity surrounding this loss event and the fact that access to the area most badly affected has only begun in the last few days, suggests that loss estimates are more likely to rise than to fall, in subsequent PCS surveys of the insurance market.
Also business interruption, while included, could still escalate, as it can take time to fully manifest and for the extent of BI claims to be properly understood.
PCS will resurvey insurers for their latest estimates of anticipated total losses from the event in the coming weeks to ensure accuracy of estimated, capture any missed losses as uncertainty clears up and to ensure that the industry loss figure is fully developed.
It remains early at this stage to understand the full extent of the damage suffered from the Fort McMurray wildfire, or its eventual financial impact on insurance and reinsurance providers. It is now clear that this is the largest insured catastrophe loss event of 2016 globally and also the largest insured catastrophe loss event in history for Canada.
The wildfires in the region of Canada affected continue, with some fires spreading outside of Alberta now. That, added to the complexity and the fact some residents are only just returning to their properties and businesses, as well as uncertainty around business interruption claims, all suggests the final toll from these wildfires could rise.
– Canada fires continue, set to be largest insured wildfire loss ever.
– Fort McMurray wildfire a US $3.4bn to $6.9bn insurance loss: AIR.
– Markel CATCo expects any Canadian wildfire loss to be minor.
– Reinsurance & retro to take significant share of Canada wildfire loss.
– Japan quakes, Canada wildfire to take nat cats over budget in Q2: JPM.
– Fort McMurray wildfire a “reinsurance event”, maybe ILS: Deutsche Bank.
– Fort McMurray wildfire could cost insurers up to C$9bn: BMO Capital Markets.
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