The writing is on the wall for future wildfire risk in Canada

0 June 10, 2014 at 11:11 am by

Prior to the $700 million wildfire in Slave Lake, Alberta in May 2011, ICLR was on record warning the Canadian insurance industry of a $1 billion wildfire loss event in the country. And while $700 million isn’t $1 billion (even when one adds the ‘rule-of-thumb’ 6 per cent to cover lost adjustment expenses) the point is that Canadian insurers would soon have to reckon with a large wildfire loss, and that warning came to fruition.

But while the Institute did caution of a large fire event for Canadian insurers in the not-so-distant future, we most certainly did not call Slave Lake – or any other place like it – as the possible venue of such a fire. We did warn of Vancouver, Victoria, Whistler, Jasper, and cottage country in Ontario and Quebec among others as possibilities. But who knew that a fire burning one-third of a town of just 7,000 people could lead to such large numbers? What if the fire consumed half, two-thirds or all of the town, or if fire got into Fort McMurray, as it almost did on one or two occasions in 2011?

The disconcerting thing is that, as noted by Brian Stocks, President of B.J. Stocks Wildfire Investigations and a globally recognized Canadian wildfire science stalwart “there are hundreds of Slave Lakes across the country.”

Yet, there are still challenges getting the Canadian insurance industry’s attention on wildfire risk. This, despite the fact that Canada is one of the most forested countries in the world, and population growth in the wildland/urban interface (WUI) continues at an accelerated pace.

After the extremely active wildfire season in British Columbia in 2003, which saw the destruction of 334 homes, several businesses (including a large sawmill) and forced the evacuation of 45,000 people; many underwriters were calling the series of fires ‘unique’, a ‘one-off’ and unlikely to happen again. Yet, less than eight years later, one fire triggers insurance claims totalling more than three times those recorded in B.C. ($700 million for Slave Lake against a recorded $200 million for British Columbia) and, sadly, insurers and others, again, called it just another “one-off.’

This leads one to ask: How many times are we going to call such fires ‘one-off’s before we sit up and take notice?

ICLR concentrates its hazard research on four peril areas: earthquake, wind, water and wildfire, and this is reflected in the organization’s five year strategic plan (2011 to 2015), which was written and released prior to the Slave Lake fire.

Of wildfire, the plan notes:

“ICLR will…actively work to assess the growing risk of a wildfire destroying an urban area in Canada. Billion dollar loss events have increased in frequency in the United States, Australia and Europe, and could strike in Canada. The Institute will continue to work with the wildfire research community, the Canadian Forest Service, provincial governments and municipal leaders. In particular we will seek to increase the awareness of the insurance industry about the increasing risk of loss and make established tools, like FireSmart, available to champion loss prevention.”

Later in the document, it continues…

“Notwithstanding the 2003 wildfire season in British Columbia, the Institute is of the opinion that the Canadian insurance industry may be too complacent about the potential for a major wildfire loss in the not-too-distant future. Hence, whenever possible, ICLR works to get messaging out that insurers need to consider the eventuality, first by becoming aware of the risk and of vulnerable areas of the country and, second, by including wildfire in pricing relevant risks…The Institute is also working to spread awareness within the insurance industry of the Canadian Wildland Fire Strategy (CWFS) and the important need to get funding for the plan as soon as possible, as well as awareness with regard to the availability of and need for better tools (including maps) to monitor and assess wildland fire risk.”

Viewed in the following terms, the Canadian insurance industry has the rare opportunity to approach the peril of wildfire much differently than it has approached the hazards of wind and water, i.e. it has the chance to essentially start ‘from the beginning.’

The industry can’t turn the clocks back and start again on the underwriting of wind-related risk. And while it may wish it could do so with water losses, which have proven to become a problem bordering on crisis, too much of that has flowed under the bridge.

However with just two major wildfire losses on the books in recent times (2003 and 2011) and ICLR warning of a future of more and larger wildfires in this country, now is the time to really consider the hazard, and endeavour to understand wildfire and the broader issues that inform wildfire risk, such as land/forestry management, the role of and interplay between governments of all levels, increasing development into the wildland/urban interface, and climate change, among them.

If the industry fails to do so now, it could very well find itself in position ten or twenty years out where stakeholders are sitting around a table talking about the wildfire insurance crisis in Canada and what to do about it.

Wildfires and their growing potential to devastate urban centres is an area of growing concern. It is a risk that has spread closer and closer to the urban interface in recent years. The frequency of large fires in the western U.S. has changed dramatically in recent years, and there is talk in wildfire science circles that parts of the U.S. may be moving to a 12-month wildfire season.

With this, and as per our five year strategic plan, ICLR will continue to work with its partners to better understand and manage this threat, and to raise awareness about it.

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