Insurers are facing “large potential losses from what is likely the costliest natural catastrophe in Canadian history,” says a report published Monday by the New York City-based credit rating agency Fitch Ratings.
It’s difficult to precisely calculate the costs of the fire, given that it is still not under control, the report concedes. Nevertheless, it notes that Bank of Montreal has estimated that losses will range from $2.9 billion to as high as $9.0 billion.
“To put this in perspective, the three costliest insured disasters in Canadian history were the Alberta floods of 2013 at $1.7 billion, the Ontario & Quebec ice storm of 1998 at $1.6 billion and the Slave Lake, Alta. fire of 2011 at $700 million,” the Fitch report says.
Says the report: “There are two primary differences that make the potential for Fort McMurray loss estimates to be multiples higher than Slave Lake: First, the average price of a home in Fort McMurray is $627,000, according to Fort McMurray Real Estate Board, versus $300,000 in Slave Lake, according to the Slave Lake government. Second, the Slave Lake fire destroyed 374 homes and damaged an additional 52 properties.”
The report also cites information from reinsurance broker Aon Benfield’s Impact Forecasting Unit that the fire has “damaged or destroyed over 1,600 homes and structures over 25,000 acres.”
The distribution of insured losses between insurers and reinsurers is unclear, the Fitch report says, but “the magnitude of the event leads to a larger proportion of losses borne by reinsurers.”