Wildfire-Insured Losses Remain Manageable for Canadian P&C Insurers but Will Add to Extreme-Weather Concerns

DBRS Morningstar published a commentary discussing the impact of ongoing wildfires on the financial strength of Canadian property and casualty (P&C) insurance companies.

Key highlights include the following:

-- Estimated wildfire losses remain within the financial absorption capacity of most Canadian P&C insurers.

-- Home insurance prices will remain under pressure in the short term due to the rising cost of natural catastrophes, a hard reinsurance market, and inflation.

-- Increasingly larger and frequent extreme-weather events could render the insurance of certain physical risks not economically viable.

“Although Canadian P&C insurers’ results are likely to come under pressure during Q2 and Q3 2023, as they bear the weight of an above-average wildfire season, we expect that insured losses will remain manageable for most companies,” said Marcos Alvarez, Global Head of Insurance. “However, we anticipate that the increase in extreme weather and natural catastrophe losses, together with a hard reinsurance market globally and relatively high inflation levels, will continue to pressure home insurance prices up in the near term.”