Did Fort McMurray wildfire impact reinsurance?
Published: June 28, 2017
Updated: July 24, 2018
Author: Luke Jones
CATEGORY: Industry News
The Fort McMurray wildfire had a lasting impact on reinsurance renewal and retrocession costs, an impact that is still being felt today. Analysis from MSA Research Inc. shows that both costs have increased since last May’s wildfire.
The catastrophic event was the largest insurance loss in Canadian history with a total cost of US$4 billion to the industry. During the first week of May 2016, a wildfire that spread through Alberta parts of Alberta hit the town of Fort McMurray, destroying thousands of structures and displacing 90,000 residents for over a month.
A large portion of the insurance cost landed on globally held reinsurance companies, with only a small loss going to capital markets capacity firms. Because of this imbalance, there has been a steady increase in reinsurance and retrocessional protection rates.
MSA Research reported the findings, adding that growth in the reinsurance market overtook premiums underwritten during the first three months of 2017. CEO and president of the company, Joel Baker, says this may be because of Fort Mac.
“This may be a result of higher reinsurance costs in a post-Fort McMurray year,” Baker told Artemis.bn.
The study seems to show that reinsurance rates are likely to increase in the wake of a major insurance loss event.
It is worth noting that some investigators and analysts say the change in the Canadian market has not been as profound as in previous years.