Morningstar DBRS says it remains too early to determine whether the 2024 wildfire season will be comparable to 2023, the most active and destructive wildfire season on record, but the ratings agency adds that the industry is well-prepared, capitalized and diversified enough to manage the related losses.
Jasper wildfire
The note, Raging Inferno in Western Canada: Implications for Canadian Property and Casualty (P&C) Insurers says the Jasper Wildfire Complex could potentially cause up to $700-million in insured losses, with likely extra claims from tourism businesses. “The Canadian P&C industry is well prepared for wildfire-related events, given its strong capitalization, diversification and reinsurance risk transfer strategy,” Morningstar DBRS researchers write. “We expect the ongoing 2024 wildfire season to be manageable for P&C insurers, resulting in an earnings event that will not directly negatively affect capital or credit ratings, assuming no major urban areas are materially affected.”
The report goes on to say the damages in Jasper could be comparable to those incurred during the Slave Lake wildfire in 2011. They note that wildfires were not a major contributor to Canada’ insured natural catastrophe losses historically but have become more of a concern since 2021. “Overall, the potential insured damage caused by the 2024 wildfire season should be manageable for Canadian insurers but,” they warn, “if extreme weather events continue to happen more frequently in 2024, Canadian P&C insurers may start facing earnings pressure.”
