A wildfire in the Alberta city of Fort McMurray is set to become the costliest ever Canadian natural disaster for insurers, with 1,600 buildings destroyed and another 19,000 under threat, analysts and industry sources say.
The bill for insurers is expected to be several times more than the C$700 million ($544 million) paid out for a wildfire in Slave Lake, Alberta, in 2011.
The fire in Slave Lake, a small town 250 km (155 miles)northwest of the city of Edmonton, led to the destruction of 374 homes, less than a quarter of the number of structures already destroyed at Fort McMurray, and damaged another 52.
“If you’re looking at four times that of Slave Lake you’re getting to well over C$2 billion ($1.6 billion) so there is a possibility that this may become the biggest catastrophic claim in Canada,” said DBRS analyst Stewart McIlwraith.
The unchecked fire, now in its fourth day Wednesday, has prompted the full evacuation of Fort McMurray’s 88,000 residents. It has not, however, endangered the major oil producers in the area, the heart of the oil sands industry.
The fire is also likely to exceed the C$1.9 billion in losses caused by the Alberta floods of 2013, which set the record for the costliest Canadian disaster. Those losses were limited by the fact that many policies did not cover the type of flooding experienced.
Shares in Intact Financial, Canada’s largest property and casualty insurer, closed nearly 4 percent lower. The company said it has the biggest exposure of any insurer to the region.
“It could be quite significant in terms of a loss for them,” said Edward Jones analyst Jim Shanahan.
Intact declined to comment on the likely scale of its losses, but Chief Executive Charles Brindamour told analysts on the company’s results call that “there are lots of similarities between Fort McMurray and Slave Lake.”
Analysts said other insurance providers with exposure to the region include Toronto-Dominion Bank and international insurers Aviva and RSA.
The Insurance Bureau of Canada, which represents Canadian home, cars and business insurers, said it was too early to speculate on the cost of claims.
The average price of homes in Slave Lake is much lower than that of homes in Fort McMurray, where a decade long oil boom sent housing prices soaring.
Experts say in Fort McMurray insurance policies would likely cover all damage to property and belongings damaged by the wildfire.
($1 = 1.2856 Canadian dollars) (With additional reporting by Euan Rocha and John Tilak in Toronto; editing by Mary Milliken)
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