A home destroyed by the Eaton Fire in front of a home that survived in Altadena. Calif., on Jan. 13.Noah Berger/The Associated Press
The wildfires devastating Los Angeles will likely increase home-insurance premiums in Canada by raising the cost of reinsurance policies for providers.
Insurance companies purchase reinsurance from other, often multinational companies to protect themselves in the event of catastrophic and costly natural disasters, as major weather events become more frequent.
The Los Angeles fires have left at least 24 people dead and 12,000 structures damaged.
As such deadly and destructive fires, as well as flooding events, become more common in Canada, insurance experts say Canadian consumers could be hit with price increases, especially in British Columbia, Alberta and Quebec – provinces that are prone to costly fires and floods.
Earlier this week, the Insurance Bureau of Canada (IBC) reported that insurable damages from severe weather events in this country hit a record $8.5-billion in 2024, blowing past the previous record of $6-billion in 2016, when a wildfire destroyed large swaths of Fort McMurray, Alta.
Canada used to account for 2 per cent of global losses but is now accounting for roughly 4 per cent, said Craig Stewart, the vice-president of climate change and federal issues at IBC. The U.S., meanwhile, suffered US$41-billion of insurance losses from Hurricane Milton and Hurricane Helene alone, comprising roughly 29 per cent of global losses in 2024.
“Reinsurers are looking at North America and saying: Boy, that’s a much pricier place to do business,” Mr. Stewart said.
“North America is accounting for an inordinate share of losses globally, and reinsurers are recalibrating where they allocate capital based on risk – and these wildfires will compound this.”
He said reinsurance prices in Canada already spiked roughly 100 per cent two years ago, with insurance companies eating up much of the increases to limit the impact on their customers.
Patrick Douville, the vice-president of global insurance and pension ratings at credit ratings company Morningstar DBRS, said some analysts thought there could be downward pressure on reinsurance premiums after such a large spike in prices, but the persistence of severe weather events means premiums could continue to rise and end up increasing prices for the average consumer.
“Certainly the [Los Angeles fire] event will cause reinsurers to be a bit more prudent,” Mr. Douville said.
Mr. Stewart said home-insurance premiums in riskier parts of the country have already been rising 5 to 15 per cent a year recently. He added they could rise in less risky parts of the country, too, but will likely be concentrated in Alberta, B.C. and Quebec.
He said there is no immediate risk that some homes will become uninsurable, as is currently the case in California. Unlike Canadian jurisdictions, California has regulated price increases in insurance premiums; since insurance providers cannot pass on their increasing costs to consumers, some companies have left the state or are refusing coverage to certain homes.
Disaster costs are overwhelming private insurance. We need a national public insurer
Mr. Stewart said the IBC is calling on Ottawa to develop a strategy to ensure the riskiest homes can still be insured. The federal government has already committed to creating such a strategy for homes at high risk of flooding.
Mr. Douville noted that as damages from severe weather events increase in both numbers and costs, insurance companies will get more precise with their pricing, adding they are already improving their modelling to understand which properties are at greatest risk from wildfires.
He said flood insurance has been difficult to purchase for homes near water and securing fire insurance could become similarly difficult.
“If you’re at the edge of urban areas and near wildlands in California, it’s really challenging to get insurance – it’s either unavailable or unaffordable,” he said.
“There’s risk of that happening as well in Canada for properties on the edge of built areas.”
