Growing wildfire risk will result in rising insurance premiums, experts say

financialpost.com:

TORONTO — Canadian insurers are grappling with the higher risk of wildfires as this year’s fire season breaks records, and experts say rising premiums are just one way the industry is seeking to adapt to the changing landscape.

“The more losses, the more of these events, the higher the risk and the higher insurance premiums will trend,” said Craig Stewart, vice-president of climate change and federal issues at the Insurance Bureau of Canada.

Thousands of residents in British Columbia and the Northwest Territories were forced to evacuate their homes in recent weeks as hundreds of wildfires raged on. More than 15 million hectares have been burned so far this year by almost 5,800 fires, according to the Canadian Interagency Forest Fire Centre Inc.

Nadja Dreff and Marcos Alvarez at DBRS Morningstar estimated in a report this week that total wildfire-related insured losses in Canada for the third quarter of 2023 will be between $700 million and $1.5 billion, which they called “manageable” for insurers.

“However, the wildfire season is not yet over and there is the potential for any of the fires to intensify and further pressure Q3 2023 results, especially if the fires affect densely populated regions, economic hubs, or key infrastructure. Larger and more frequent weather-related losses will continue to pressure property insurance prices higher in the near term,” they said.

Historically, wildfire damage has been a lot less common than flooding, said Kathryn Bakos, director of climate finance and science at the Intact Centre on Climate Adaptation.

But when it does happen, it tends to be significantly worse on average in terms of damage, she said.

“We’re seeing this right now in Kelowna, with the fires in Northwest Territories.