Claims costs keep rising for B.C. catastrophes

British Columbia’s costliest severe weather event in provincial history just got more expensive.

Catastrophe Indices and Quantification Inc. (CatIQ) confirmed to Canadian Underwriter Friday that the Canadian property and casualty insurance industry expects to pay out $515 million for claims related to the massive flooding. Preliminary estimates from CatIQ were $450 million in insured damage. The federal government also promised an initial $5 billion payment for B.C. disaster relief to help pay for storm damage.

Flooding wasn’t the only NatCat B.C. endured in 2021, it also saw an intense wildfire season. CatIQ recently updated the estimated insured losses from the wildfire in Lytton to $102 million, up from an initial estimate of $78 million.

Severe flooding in southwestern B.C. began in mid-November with a series of ‘atmospheric rivers’ that brought record rainfalls over a two-week period. Rivers and streams overflowed, washing away roads, bridges and railways, and flooded farms in up to two metres of water. Serious flood damage was seen in Merritt, Spences Bridge, Princeton and Hope.

At the peak of the emergency, nearly 15,000 people were forced from their homes.

Elsewhere in the province, a June 30, 2021 wildfire burned down an estimated 90% of the village of Lytton. Initial estimates were about 300 claims, the majority of which were related to residential properties.

“With the number of claims largely unchanged, the significant delays in recovery and reconstruction are a key driver of the increased costs,” Insurance Bureau of Canada (IBC) said in a press release.

At the time of the fire, a historic “heat dome” in late June and early July brought record-breaking temperatures well above seasonal averages, and accelerated the drying and curing of fuels to dangerous levels. Lytton set the all-time Canadian heat record for three days in a row, culminating in a high of 49.6°C.

“It has been over six months since wildfire devastated Lytton, yet the reconstruction of homes and businesses has yet to be permitted in the village,” Aaron Sutherland, vice president of IBC’s Western and Pacific region, said in the release. “We commend those leading recovery efforts, but greater urgency is needed. The community remains much the same today as it was immediately following the fire, only now it is blanketed by several inches of snow.”

Long delays in the recovery process may result in fewer residents returning to the community, Sutherland adds.

Removal of debris from destroyed properties, which would typically occur within days or weeks of the damage, is not yet permitted. The community is in an area of significant archeological importance to local First Nations, and it is critical that a respectful, responsible debris removal process begins immediately so that items of archeological significance can be protected, IBC said.

Until ash and debris are removed and archeological work commences, there is no prospect of beginning the work needed to rebuild Lytton. In contrast, two other communities devastated by wildfire — Fort McMurray (2016) and Slave Lake (2011) in Alberta — had most debris removed after six months, and reconstruction was well underway.

Another concern that will arise in coming months is the expiry of additional living expense (ALE) supports that insurers are providing, IBC said. ALE helps insured residents cover the additional cost of accommodation and other living expenses as they wait for their home to be reconstructed. “However, there are limits to these coverages and continued delays increase the likelihood that some residents may exhaust this financial support before their homes are rebuilt.”

In early August 2021, Shane Swinson, senior vice president, insurance portfolio at First Onsite Property Restoration, told Canadian Underwriter “the biggest impact that we’re seeing right now from a claims perspective” is ALE claims. Anita Paulic, director of operations & catastrophe response for ClaimsPro in Vancouver, also said at the time adjusters saw “everything from total losses to [ALE] and everything in between.”

Insured losses across Canada topped $2 billion for the second year in a row. Total insured Cat losses sat at $2.1 billion last year; in 2020, insured losses were estimated at nearly $2.3 billion.

 

Feature image: A motorist drives on a service road along the closed Trans-Canada Highway as floodwaters fill the ditches beside the highway and farmland in Abbotsford, B.C., on Wednesday, December 1, 2021. THE CANADIAN PRESS/Darryl Dyck