Where there’s fire, there’s smoke

Insurers are asking clients more often about smoke prevention and evacuation plans

Environmental risk is uppermost in the minds of Canadian commercial property underwriters these days. They’re asking more questions about clients’ preparedness for smoke damage, evacuation procedures, and preventing flood damage at their businesses.

And while three-quarters of Canada-based firms believe they’re prepared for climate change and associated catastrophic risks, claims data reveals otherwise, says a survey commissioned by Beazley in January 2025. It asked more than 3,500 global business leaders and commercial insurance buyers about four different categories of risk — including environmental risk.

The results show 66% of Canada-based business leaders are adopting new risk management procedures due to extreme weather such as wildfires and flooding.

“This is an encouraging shift,” says Zachary Cruickshank, regional leader of Canadian commercial property and country manager for Beazley in Canada. “As specialty insurers, we’re well-positioned to support businesses in strengthening their risk management frameworks, drawing on both our underwriting and claims expertise and the practical insights of our risk engineers.”

Wildfires are top of mind for both commercial insurers and their clients. So far in 2025, Catastrophe Indices and Quantification Inc. has reported four wildfire-related catastrophes, meaning each event caused insured damage exceeding $30 million.

As of Aug. 11, the latest figure from Interagency Forest Fire Centre says 4,363 fires burned or burning year to date. At that point, there were 712 active fires, with 69 of them being out of control.  

Cruickshank tells CU protection from smoke damage and evacuation procedures are new areas of focus for commercial property underwriters when speaking to clients.

“These days, smoke damage becomes the bigger issue…as opposed to the actual fire,” he says. For example, underwriters are asking more questions about heating, ventilation and air conditioning (HVAC) systems in buildings. Specifically, they want to know if the HVAC systems have shutoffs.

“Smoke damage consistently emerges as a contributor to large-scale losses across the industry,” Cruickshank says. “You could have very minor smoke get into a building, and once that gets into the HVAC system, that’s pumped throughout the entire facility. So, manufacturers will have an HVAC shutoff interconnected with their fire alarms or their sprinkler systems.”

Smoke damage can spoil perishable goods or textile items such as clothing, driving losses higher.“There is a lot of emphasis, especially in wildfire areas, on clients’ smoke controls as well as their fire controls,” Cruickshank says.

Underwriters are also asking about businesses’ evacuation plans. “When we have to evacuate a large community, you’re now starting to see an impact on cover,” Cruickshank says. So, underwriters are asking commercial clients for detailed information about provincial and territorial evacuation notice requirements.

“Before you get that [evacuation] notice from the government, what is your actual protocol to do so, with your main concern being the safety of employees on the premises,” says Cruickshank. “We’re starting to see it more built into a lot of business continuity plans.”

Flood prevention is also on the minds of P&C insurance professionals. For example, underwriters are asking about intellectual property risk associated with storing documents in basements exposed to flood risk.

They want to know a client’s methods for stemming the tide of floodwaters. Hotels located on riverbends have readily deployable inflatables and sandbags, as Cruickshank points out.

And in downtown cores, developers are starting to place mechanical systems — such as HVAC, plumbing, fire protection and electrical systems—higher in the building, rather than in the basement.

Cruickshank says the industry is gathering more loss control data with each passing NatCat flooding event, and passing lessons learned to clients.