Insurance companies forced to fork over billions of dollars to cover damages from the Fort McMurray wildfire will remain financially sound despite their enormous losses, but some homeowners will likely face spikes in their premiums.
One expert said anyone who lives near a dry forest or somewhere particularly vulnerable to wildfire risks could see their rates spike.
"And that naturally occurs after a large loss in insurance, there's sort of a period of time where rates go up and then competition sort of brings it back down," he said.
The Bank of Montreal has predicted the devastating wildfire could cost insurers as much as $9 billion while Moody's has estimated a total around $5 billion. Whatever the final tally, it will likely be the costliest natural disaster in Canadian history.
According to the Insurance Bureau of Canada, the floods in southern Alberta in 2013 hold the current record for insured losses, costing the insurance industry $1.8 billion. The record had been held by the ice storm of 1998 that hit eastern Ontario and Quebec, with insurers doling out $1.6 billion. The massive fire that destroyed much of Slave Lake, Alta., in 2011 caused more than $700 million in insured losses.
But the wildfire in Alberta alone wouldn't necessarily trigger a rate increase, one IBC spokeswoman said.
Instead, she suggested hikes would be caused by the cumulative impact from the rise of unpredictable extreme weather and natural catastrophes. Before 2013, insurers paid on average around $500 million a year in extreme weather insurance damages, she said. Now that total hovers around $1 billion.
