While the nigh-apocalyptic images of smoke-drenched New York City made striking headlines last week, insured losses from the wildfires still raging across Canada are not expected to match 2016's record year.

Canadian property and casualty insurers' results are likely to come under pressure during the second and third quarter, but losses will remain "manageable" for most companies, according to Marcos Alvarez, global head of insurance at credit rating business DBRS Morningstar.

"We've talked to several companies in Canada and they still believe insured losses are relatively small, probably somewhere in the range of C$50 [million] to C$200 million, which is manageable," Alvarez said in an interview. "It is still early in wildfire season, but most will be able to absorb losses with little impact."

Fort McMurray looms large

While the wildfires in Alberta, Québec, and Atlantic Canada are creating significant environmental concerns, the economic impact should pale in comparison to 2016.

Losses from the Fort McMurray wildfires that year were a record high of C$4.3 billion, in 2021 dollars, according to a report from the Insurance Bureau of Canada. Those blazes affected an oil-producing region in the province of Alberta, disrupting the industry and forcing the evacuation of nearly 90,000 people for weeks.

"Canadian wildfires tend to be in remote areas that are not densely populated and so these are not really expensive losses in terms of property values because it's mostly forest," Alvarez said. "If you look into the following three to five years, you see that there is the recent trend upward in loss, but that is mostly driven by storm and water damage, not fire."

The Fort McMurray fires made 2016 the worst year for insured catastrophe losses in Canadian history, breaking the 2013 record. Insurers paid out more than C$3.6 billion in 2013, according to a 2022 report from the Insurance Bureau of Canada, including C$1.8 billion for floods in southern Alberta and about C$1.1 billion for summer storms and flooding in Toronto.

Intact Financial Corp., the largest P&C insurer in Canada at the time of the Fort McMurray wildfires, reported C$127 million in related losses during its 2016 second-quarter earnings report.

Higher homeowners rates to come as losses rise

More extreme weather, combined with a hard reinsurance market globally and relatively high inflation levels, will continue to push home insurance prices up in the near term, according to Susan Murphy, president of Hub International Ontario Ltd. While the majority of catastrophe-related loss still comes from water and wind damage, Murphy said wildfires losses appear to be trending upward, though they have not reached the point of regularity seen in some parts of the US.

In Canada, wildfires are still perceived as accidents and are insured as such, said Murphy, unlike in California where they are more frequent and often near more densely populated areas.

"California would not be looking at wildfires as accidents anymore because the frequency has increased so significantly that it has become a part of living there and that's why insurance has become so much more difficult," Murphy said. "That's not going to change until our mentality shifts from wildfires still being accidents to perceiving these wildfires being the new norm."