How is Canada's record wildfire season affecting commercial underwriting?

How is Canada’s record wildfire season affecting commercial underwriting? | Insurance Business Canada

Catastrophe & Flood

How is Canada’s record wildfire season affecting commercial underwriting?

Underwriting leaders weigh in on potential challenges

Catastrophe & Flood

By
Gia Snape

Canada’s record-breaking wildfire season has prompted commercial insurers to look more closely at their portfolios, manage limits, and aim to create sustainability in the market, underwriting leaders from QBE Canada told Insurance Business.

“It’s certainly increased the focus from an underwriting perspective,” said Melanie Mason (pictured right), property underwriting manager at QBE Canada. “Wildfire has always been a secondary peril, but with the increased activity that we’ve seen in the past few years, I think underwriters want to be more diligent in knowing what they have exposed and managing those limits accordingly.”

Scott Pidduck (pictured left), QBE’s director of underwriting in Canada, agreed that portfolio optimization would be a top priority for commercial carriers.

“Natural catastrophes are challenged for insurance on the property sector, in any shape or form, and there’s been a shining light on wildfires as we’ve seen intensity take off,” he said. “Understanding the collection of risk that you have in certain areas that are more prone to wildfire is key.”

At times, smoke from wildfires also drifted to the United States’ East Coast, blanketing New York City in a thick orange smog.

QBE, for its part, is taking its geographical exposures into more consideration.

“This year, we’ve seen wildfires expand across different regions such as Nova Scotia,” Pidduck said. “Typically, we would be focusing on BC and Alberta, so it’s created a different lens that we have to apply to our portfolios.”

Amid the wide-reaching impact of wildfires, Mason expects a rise in large claims over this period. But she stressed that supporting clients and helping get their businesses back on track is a top priority for QBE.

“I think definitely there will be some impact to the increased costs of claims, which we’ve seen across the industry anyway,” she said.

“You’ve got large areas that are impacted that all need support. Our priority is being there for our clients when they need us the most and making sure that we’re able to respond accordingly to help them get back on the feet.”

Capacity challenges on the horizon?

Amid escalating costs associated with insuring against extreme weather events, including wildfires, could there be capacity challenges in Canada’s commercial insurance market?

Mason noted that the increased exposure to wildfires might make certain accounts more difficult to place, but she said challenges wouldn’t manifest “across the board.”

“I would say that’s probably going to be very account-specific and relating to their geographical exposure and their claims experience,” she said.

“For the most part, the mainstream insurance markets are still supporting wildfire. We’re not seeing the same kind of exits that they’re seeing in the US at this point.”

Pidduck likewise didn’t expect major carrier pullouts in wildfire-exposed locations.

“This is not a new phenomenon,” he said. “It’s getting more enhanced, but it’s an area that we need to make sure we understand. We just look at our portfolio of companies, understand the concentration of risk and locations, and then deploy capacity in a meaningful but disciplined way.”

Supporting clients with risk mitigation

With the wildfire season far from over, Pidduck and Mason said encouraging risk mitigation and communication with insureds is a key part of QBE’s strategy.

“We try to support our clients and provide them with some insights, sharing information and knowledge that we’ve developed or learned over the past years,” Pidduck said.

Mason emphasized the importance of a business continuity plan for clients.

“Generally, we’re on national accounts that have a scope of risk across the country, so it’s helpful to understand where they can pick up in other locations if there is a particular loss that happens to them,” she said.

“The clients know their story better than we do,” Pidduck added. “To me, it’s about meeting the client and having that face-to-face interaction to understand their risk profile.

“Understanding and sharing information is what can help an underwriter have a level of comfort with the risks, and that can help support capacity and deductible options, and just getting that client over the finish line.”

Are you a broker working with clients in wildfire-hit areas? Tell us how you’re supporting them in the comments below.