SCOR estimates Alberta flooding at 40 million euros

SCOR Global P&C’s net pre-tax losses after retrocession and reinstatements are projected at 40 million euros in the wake of severe flooding that devastated parts of Alberta, including its most populous city, but a silver lining may be the possibility of enhanced discussions around flood management.

“In view of the visible human and economic consequences, we expect the flooding in Alberta and Toronto to further encourage engagement between the insurance industry and the various levels of government in Canada responsible for flood management, in order to find solutions to the limited flood coverage currently available to Canadians,” Victor Peignet, CEO of SCOR Global P&C, notes in a July 17 statement.

About two weeks after southern Alberta was hit, the Greater Toronto Area (GTA) witnessed record rainfall July 9 when 126 mm was reported at Pearson International Airport, beating out Hurricane Hazel six decades earlier by approximately 5 mm.

The heavy rain overwhelmed systems, causing, among other things, extensive flooding, power outages in Toronto and other parts of the GTA, disrupted public transit, inundated roadways, closed city services and cancelled flights.

SCOR notes the Alberta floods resulted in mass evacuations of people from their homes and major disruption to the Central Business District of Calgary. As such, the global reinsurer points out the flooding may ultimately become the largest insured loss in Canada’s history, surpassing the 1998 ice storm.

That said, “uncertainties remain regarding the extent of the losses and the insurance coverage, which could result in material impacts and deviations from the current estimate,” SCOR reports. “It is still early days in terms of assessing the size of the event and its impact for the (re)insurance industry,” Peignet adds.

A ratings update from Standard & Poor’s Ratings Services, dated July 16, suggests that insured losses from the widespread flooding in Alberta, the flash floods in Toronto and the deadly train derailment in Quebec – both individually and combined – are likely to have a limited impact on Canadian property and casualty insurers ratings.

Based on current available loss estimates, the events could cause several billion dollars in insured losses, notes the RatingsDirect commentary.

“We believe the flooding in Alberta in June will have an effect on second-quarter results, while the impact of the combined events could affect these companies’ full-year earnings. However, we believe insurers generally have sufficient available reinsurance coverage, adequate capital adequacy and enough group-level support (for certain subsidiaries) to absorb the losses,” the commentary states. “The events, in our opinion, could lead to rate increases, specifically for insured risks in Alberta more than for other regions.”

Commenting on the GTA flash flooding, the information notes that “even though the region recovered relatively quickly, early reported estimates suggest that insured losses could be comparable with those from the 2005 Toronto wind and rainstorm, which were about $590 million. We believe sewer back-up claims would constitute a significant portion of claims from this event.”

With regard to the derailment, authors say “we expect the localized nature of the disaster will limit insured losses for Canadian p&c insurers. In addition, although these insurers may have to cover the losses initially, we expect that the majority of losses could be subrogated to the rail company.”

As for the flooding in Alberta, authors note that they “expect that more than half of the insured losses from June’s floods for our rated insurers would likely be ceded to reinsurers and that the losses, in general, will be weighted toward commercial lines business.”