Apocalyptic’ blaze in Canadian oil city could cost insurers $9bn

The insurance bill arising from the wildfire decimating the Canadian city of Fort McMurray could reach CAN$9bn (US$7bn), making it by far the costliest natural insurance event in Canadian history, an analyst said yesterday.

Around 88,000 people are displaced after authorities called for the complete evacuation of the city in northern Alberta on 3 May in the face of out-of-control forest fires, which one resident described as "absolutely apocalyptic".

It was something out of a movie. It was absolutely apocalyptic. There were vehicles stranded everywhere. The sky was black and orange. There were – and are still – so many people trapped– Erica Decker, Fort McMurray resident

By 4 May at least 1,600 homes and buildings were known to have burned down in the one-time boomtown that serves the oil producing Athabasca oilsands, but the toll is certain to rise as the total area in flames around the city ballooned by a factor of nearly 10, to 85,000 hectares, amid unseasonably hot and windy weather conditions yesterday.

In some cases with just minutes to escape residents described driving through flames and thick smoke in the dash to the lone Highway 63 leading south, now closed and by times itself bordered by fire.

"As we pulled out of the driveway, we could see the flames reaching our front lawn," an emotional Erica Decker, who fled with her family, told UK newspaper The Guardian.

"It was something out of a movie. It was absolutely apocalyptic. There were vehicles stranded everywhere. The sky was black and orange. There were – and are still – so many people trapped."

From the safety of a shelter in the southern Alberta city of Edmonton, she added: "We knew we wouldn’t have anything to go back to."

In the face of the expanding inferno, when dawn breaks today rescue workers will begin evacuating 25,000 people who fled Fort McMurray to work camps in the oilsands site five kilometres away. Canadian police will escort the first convoy of 400 vehicles through the burning city and onto Highway 63 heading south, reports national broadcaster, CBC.

In better times: Fort McMurray, the one-time boomtown serving Canada’s Athabasca oilsands (Wikimedia Commons)

To combat the fires the government has deployed more than a thousand firefighters, 145 helicopters, 138 pieces of heavy equipment and 22 air tankers, but with new fires starting all the time and efforts hampered by dry, gusting wind, authorities are desperately hoping for rain. The weather is not cooperating, however: today and tomorrow are forecast to be hot and sunny, with chances of precipitation worryingly slim in the coming days.

Costliest disaster

Meanwhile, an analyst at the Bank of Montreal warned yesterday that if the fires complete the destruction of buildings and homes in Fort McMurray the bill for insurers could reach CAN$9bn.

Analyst Tom MacKinnon compared the unfolding catastrophe to the most expensive fire-related disaster in Canadian history to date, a 2011 fire in the Alberta town of Slave Lake that destroyed 400 buildings and cost insurers CAN$750m.

The fire in Fort MacMurray, where both population and property prices have been inflated dramatically by lucrative oilsands work, has already destroyed four times the Slave Lake tally.

MacKinnon told CBC that if damage is limited to between a quarter and a half of all buildings being destroyed, the price tag would range from CAN$2.6bn to $4.7bn, but could hit $9bn if all the buildings were destroyed.

If even a quarter of Fort McMurray’s structures are destroyed, by MacKinnon’s analysis the fire would be the costliest insurance event in Canadian history, beating the CAN$1.9bn bill resulting from ice storms in Quebec in 1998, and the $1.8bn worth of insured damage arising from floods in southern Alberta in 2013.

With many workers evacuated oil production at various oilsands sites have slowed, causing the price of crude to rise yesterday. The Athabasca oilsands comprise approximately half of Canada’s total oil output.

Top photograph: A truck drives on a highway as wildfires burn near Fort McMurray on 4 May 2016 (Darryl Dyck/Bloomberg/Getty Images)