Co-operators General Insurance Company estimates financial cost of Fort McMurray wildfire

Source: Co-operators News Release

To date, more than 4,300 claims have been reported to Co-operators General Insurance Company (Co-operators General) by clients affected by the wildfire in the Fort McMurray area. The Co-operators Emergency Response Team has been supporting clients, including on the ground in emergency evacuation centres and temporary office locations in the area.

“This has been a devastating time for the community and residents are looking forward to returning home and starting to rebuild their lives and their community,” said Kathy Bardswick, president and CEO of The Co-operators. “While the return home will mark the start of a new phase for the community, it will also be a challenging time for residents and businesses – and we will be there to help our clients through it.”

To date, 4,376 claims have been reported to Co-operators General and its subsidiaries, including property, auto, commercial and farm insurance claims. While access to the area remains restricted, the company’s preliminary estimate indicates that the after-tax cost of the wildfires to Co-operators General Insurance Company consolidated, net of reinsurance and inclusive of reinstatement premiums, will likely amount to between $70 million to $90 million.

Athabasca, Syncrude bring back project staff as wildfire risk recedes

Source: Canadian Press

Alberta oilsands workers forced to flee the ferocious Fort McMurray wildfire are returning to begin the tricky process of restarting their projects in northern Alberta, reassured by colder weather and a forecast of rain.

In a Tuesday morning update, provincial emergency officials said the Fort McMurray wildfire had grown to 523,000 hectares, almost the size of Prince Edward Island, and was still out of control but moving farther east and northeast away from the city and industrial operations.

A similar move to repopulate the projects a week ago was stymied when the fire suddenly changed direction to again threaten industry and force about 8,000 workers to flee work camps.

Syncrude Canada spokesman Will Gibson said Tuesday that his company has adopted a comprehensive evacuation plan in case that happens again.

“We’re making significant progress on our safe return to operations plan and details of when we’ll resume production will be available at a later date,” he said.

Analysts estimate more than one million barrels per day of oilsands production – nearly half their capacity of 2.5 million bpd – were offline at times over the past three weeks as the wildfire forced staff evacuations and the precautionary shutdown of inbound and outbound pipelines. None of the projects has reported substantial damage.

Athabasca Oil said May 24, 2016 that it has resumed operations at its Hangingstone project, which produces bitumen from wells using steam to melt the thick oil. It said the facility did not suffer any damage from wildfires that crept to within a few kilometres, forcing staff to scramble to safety three weeks ago.

Prior to shutdown, the thermal project commissioned last year had ramped up to 9,000 barrels per day on the way to output capacity of 12,000 bpd. Athabasca said it expects its underground reservoir to recover to normal operating levels over the next several weeks.

Meanwhile, Suncor Energy (TSX:SU) continued to bring workers back to its oilsands mining and thermal projects north of Fort McMurray after emergency officials lifted evacuation orders on the weekend.

A CIBC report published on the morning of May 24, 2016 estimated the cash flow impact of lost Suncor production will be about $760 million, while cautioning that number could be reduced by insurance coverage.

“We expect the mining operations will be up to turnaround levels later this week and in situ operations back to mid-turnaround levels next week,” CIBC analyst Arthur Grayfer said in a note to investors.

“Assuming there is no additional fire risk, we estimate the downtime from the fire and ramp to turnaround capacity to be three to four weeks, with an additional week to get production back up to full capacity with the completion of the turnaround.”

Suncor’s mining operations have a capacity of about 250,000 barrels a day but had been reduced by about two-thirds by a maintenance turnaround in its upgrader when the fire broke out. That work will have to be completed before the upgrader output returns to normal.

Suncor’s Firebag and Mackay River thermal operations, which were also closed, have combined capacity of about 235,000 bpd.

Syncrude, owned by a consortium that includes Suncor, has capacity of 350,000 bpd at its upgrader and Mildred Lake and Aurora mines.

Spokesman Rob Evans of ConocoPhillips said workers began arriving at its Surmont thermal project site on May 24, 2016 and the company expects to have 350 workers there by May 27, 2016.

The project was producing about 50,000 bpd before being shut down. Evans said its unclear when that level will be reached again.

 

Insurance Myths: Earthquakes

Source: Softac Systems Ltd.

The myths surrounding earthquake disaster relief and earthquake insurance may result in reliance on government assistance, but because earthquakes are an insurable hazard, earthquake insurance is needed to mitigate the risk of financial loss. In BC, fire insurance covers fire from any cause including earthquake generated fire but insurance companies are lobbying to exclude earthquake fire from standard fire insurance.

Myth #1:

“If there is a major disaster and we lose everything…
the government will step in to bail us out!”

In the event of a catastrophe anywhere in Canada the federal government will provide financial assistance to the provincial or territorial government affected. This program is administered by Public Safety Canada.

Disaster Financial Assistance Arrangements (DFAA)

They look to the province or territory to spend these funds on important institutions and infrastructure and to support individuals and businesses that have suffered loss.

However, any funds disbursed by the local government will be according to the set of rules established by the province or territory, and there are exclusions.

Specifically, if an expense could be insured, repairs or relief are not eligible for reimbursement.

Myth #2:

“Well then… the province will bail us out… won’t they?”

To help those impacted by a disaster to cope with the cost of uninsurable repairs and recovery from related property damage, the province has instituted the:

British Columbia Disaster Financial Assistance Program

This program is administered by the Provincial Emergency Program. Following a disaster those affected may apply for financial assistance with losses that could not be insured.

It must be noted that earthquakes are an insurable hazard.

Homeowners and businesses are expected to insure themselves.

Earthquake Insurance Reality #1:

The insurance industry provides earthquake insurance called “Shake” coverage.

This insurance will cover damage done by the actual destructive shaking of a structure that causes a complete or partial loss of the property.

What most people do not realize is that because of modern building codes and construction techniques, most structures will survive usual earthquake events in the mid-magnitude range, but damage may still be considerable, and most of these “Shake” policies come with a usual 10% deductible.

That means on a half million dollar property, the first $50,000 will come out of our pocket.

Further, the greatest risk to property caused by an earthquake is the fires that always follow!

The “San Francisco Earthquake and Great Fire” destroyed the city in 1906. Kobe, Japan following the 1995 earthquake lost 8,000 buildings to in some cases massive fires that followed that earthquake.

There is good news for British Columbians in that “Fire Insurance”, as a matter of provincial law automatically covers “fire from any cause” including blazes that follow an earthquake.

The insurance industry has lobbied hard to have earthquake-caused-fires to be excluded from standard fire insurance, claiming that following a quake there just won’t be enough money in the pool to cover all the losses.

During the past 10 years the province has resisted attempts by the insurance industry to have changes made to this important protection for consumers.

If the insurance companies are this concerned about the risks of earthquake fires here, shouldn’t we be just as concerned?

The Insurance Bureau of Canada (IBC) Selects LexisNexis as Lead Vendor to Manage its National Flood Program Initiative

Press Release:

LexisNexis® Risk Solutions, a leading provider of data, analytics and technology to help organizations predict and manage risk,  announced November 26, 2015 that the Insurance Bureau of Canada (IBC) has selected the company as the lead partner to help it develop and manage its flood risk and exposure assessment initiative for Canada.

As a result of record flood losses in 2013 and the increasing threat of climate change, IBC has been tasked by the industry to accurately quantify the extent of flood risk and exposure in Canada. The goal of the initiative is to help IBC, its members and government stakeholders further explore the industry’s role in mitigating flood risk through the creation of a national flood program.

Working closely with IBC, LexisNexis Risk Solutions will lead the development of a new set of market-leading flood hazard maps and property-level exposure data, leveraging LexisNexis® Map View, its risk assessment and exposure management technology. Map View will enable IBC to perform advanced analytics and reporting against millions of data points quickly and efficiently. IBC will be able to clearly identify the number of properties at risk of flooding and the associated economic losses for virtually any geography in Canada. This initiative will provide the basis of understanding necessary for IBC and its stakeholders to have well informed, meaningful discussions about the future of flood-related insurance products and programs in Canada.

A key component of this initiative is the creation of all new pluvial and fluvial flood maps for Canada.  These new models, produced by LexisNexis partner, JBA Risk Management, fully leverage local river, rainfall, snowmelt and higher resolution Digital Terrain Model (DTM) datasets, resulting in completely updated river flow and rainfall estimates based upon a much more detailed hydrological study where snowmelt is now explicitly modelled.  The resulting maps will represent the most comprehensive and detailed set of Canadian flood maps, reflecting the uniqueness of the local environment and greatly improving risk assessment outcomes.

“Extreme weather events driven by climate change are increasing in frequency and severity,” said Don Forgeron, President and CEO, IBC. “Storms and flooding in recent years have turned extreme. That’s why mitigation and preparedness are vital and why IBC is stepping up to collaborate on a national flood program. IBC believes the backbone to good policy is solid research and data. That’s why we are happy to have formed a partnership with LexisNexis Risk Solutions to develop the program, which will help appraise risk and prioritize mitigation efforts.”

“This is a great opportunity to work with IBC to help quantify and address the issue of flooding in Canada as it’s important to citizens’ livelihoods, the country’s assets and the growing economy,” said Bill McCarthy, Managing Director, UK, Ireland and Canada Insurance, LexisNexis Risk Solutions.  “Many of our customers today use Map View to effectively assess and manage flood risk as well as other perils risk, and to model, manage and report on their overall exposure.”

With innovative risk assessment and exposure management technology and a 30-year history of delivering insurance solutions, LexisNexis and its Map View platform provide the capability to assess exposure country-wide, as well as breakdown exposure within individual provinces and risk zones. It identifies exposure hotspots and will allow IBC to perform sensitivity testing of flood exposure and potential losses in Canada based on scenario analyses. Map View is delivered as a software-as-a-service and users have secure, 24×7, online access to a visual dashboard, allowing them to perform visualisation, data filtering and extensive reporting.

– See more at: http://www.lexisnexis.com/risk/newsevents/press-release.aspx?id=1448551069148886#sthash.vxl7zqsX.dpuf

AIR Worldwide Estimates Insured Losses from M8.3 Earthquake in Chile at Between CLP 400 Billion and CLP 600 Billion

Source: AIR Worldwide Press Release:

Catastrophe modeling firm AIR Worldwide estimates that industry insured losses from the M8.3 earthquake that struck Chile’s central coast near Illapel on September 16 will be between CLP 400 billion (USD 600 million) and CLP 600 billion (USD 900 million). AIR Worldwide is a Verisk Analytics (Nasdaq:VRSK) business.

“The September 16 earthquake was the result of convergence between the Nazca and South American tectonic plates,” said Dr. Mehrdad Mahdyiar, vice president and senior director of earthquake hazard research at AIR Worldwide. “Here, the Nazca plate plunges beneath the South American plate, forming a subduction zone. Active subduction zones are some of the most likely plate interfaces to generate quakes of catastrophic magnitude and also pose the greatest risk of triggering tsunamigenic tectonic events.”

Authorities have stated that at least 12 people have died as a result of the quake, which was felt as far away as São Paulo, Brazil, more than 3,000 km away. Strong shaking was felt in Chile’s capital city of Santiago, the nation’s most populous city, where tall buildings swayed for up to three minutes.

Dr. Mahdyiar continued, “The main shock, which was followed by several strong aftershocks, triggered a tsunami that was recorded in several countries. The tsunami produced waves up to 1 meter in height as far away as the Hawaiian Islands.”

The port city of Coquimbo reported the highest tsunami wave at nearly 5 meters; debris and fishing boats washed inland into the downtown area, where homes and businesses were inundated. The town of Illapel, located directly east of the quake’s epicenter, suffered the heaviest damage resulting from strong ground motion.

According to ONEMI, the Chilean agency responsible for public safety and emergency response, more than 400 residential buildings have been destroyed; in addition to these, more than 700 residential buildings have sustained major damage. Chile is the world’s leading producer of copper, and several mines were affected by ground shaking caused by the quake.

“The 2010 M8.8 Maule earthquake released a significant amount of accumulated energy and reduced the seismic risk offshore of Santiago, but increased the risk along the northern segment of the subduction,” commented Dr. Mahdyiar.

The rupture area and the slip distributions of the recent earthquake and that of the 2010 Maule earthquake suggest that a small part of the Nazca subduction zone south of the rupture area of this recent earthquake and north of the rupture area of the Maule earthquake did not rupture during these two earthquakes and should be at a higher state of stress, thus increasing the likelihood of a future earthquake. This segment of the Nazca plate experienced partial or full ruptures during the 1906 M8.2 and 1985 M7.98 earthquakes and is capable of producing an M7.5 to M8.0 earthquake.

The location and magnitude of this earthquake are consistent with AIR’s recent seismicity model for this region. AIR’s time-dependent model for this region estimates a higher rupture probability for this type of earthquake compared to the corresponding time-independent estimate.

AIR’s loss estimates explicitly capture damage from ground shaking, tsunami, and liquefaction. Losses are dominated by shake damage in AIR’s scenarios, with a very small contribution from liquefaction. AIR’s estimates are based on assumptions about take-up rates in Chile (the percentage of properties actually insured against the earthquake peril), about which there is considerable uncertainty. The range in loss estimates reflect uncertainty in the slip distribution at the fault, modeled ground motion, tsunami inundation, and damage estimation. The assumed exchange rate is 1 CLP = 0.0015 USD.

AIR’s insured loss estimates reflect:
• Insured physical damage to onshore property (residential, commercial/industrial), both structures and their contents, and auto
• Direct business interruption losses

The loss estimates do not reflect:
• Losses to uninsured properties
• Losses to land
• Losses to infrastructure
• Indirect business interruption losses
• Loss adjustment expenses
• Losses from non-modeled perils, including fire-following and landslide
• Demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event.

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