Wildfires Blazing Across Canada: What This Means for Canadian P&C Insurers

DBRS Morningstar published a commentary discussing the impact of ongoing wildfires on the financial strength of Canadian property and casualty (P&C) insurance companies.

Key highlights include the following:

-- Wildfires have been particularly widespread this year, affecting most Canadian provinces and burning through 14 million hectares of land, greatly exceeding a typical year.

-- DBRS Morningstar estimates that the wildfire-related insured losses in Q3 will amount to between $700 million and $1.5 billion, but remain manageable for insurers, constituting an earnings event.

--The very challenging wildfire season in Canada has the potential to further pressure Q3 2023 results of P&C insurers, especially if the fires affect densely populated regions, economic hubs, or key infrastructure.

“While wildfires are not frequently the cause of large catastrophic losses, they have a potential to lead to high claims related to damage/total loss of property and equipment, smoke-related damage and other clean-up, cost of living expenses following mandated evacuations, and potentially for loss of income for insured businesses in the affected area.” Said Nadja Dreff, Head of Canadian Insurance. “Larger and more frequent weather-related losses will continue to pressure property insurance prices higher in the near term.”