The Current

Who foots the bill for forest fires? One expert argues there's a simple way to save taxpayer money

As forest fires rage across North America, one expert argues that governments should take out insurance policies to reduce the burden on taxpayers.

We should copy Oregon's policy of insuring against disaster, says Glenn McGillivray

A fire late last month, about 25 kilometres northwest of Vanderhoof, B.C. The BC Wildfire Service said that it is currently battling more than 450 fires. (B.C. Wildfire Service)

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As forest fires rage across North America, one expert argues that Canada needs to rethink who foots the bill once the flames have been stamped out.

"In Canada, the same-old, same-old basically is that taxpayers pick up the bill," Glenn McGillivray, the managing director of the Institute for Catastrophic Loss Reduction, told The Current's guest host Megan Williams.

The B.C. Wildfire Service announced it is battling more than 450 fires, while Ontario has called in retired forest firefighters to help battle Parry Sound 33, the largest of more than 100 blazes currently burning in the province. The cost of fighting these fires is high, McGillivray said.

"It's really not uncommon to have a billion-dollar year in Canada, when you add all the provinces and territories in."

But, he said, "there's a way in which we can pass these expenses, or at least part of them, off to the private insurance or reinsurance sector."

The burden of fighting forest fires largely falls to the provinces, McGillivray said, while the federal government is responsible for national parks, and local government often provides support in the form of first responders. But taking out an insurance policy, as Oregon has been doing for decades, could limit how much of that is passed on to taxpayers, he said.

The state of Oregon has been buying a "special reinsurance cover" from Lloyds of London for decades now, according to McGillivray.

"This cover basically will put a ceiling on Oregon's wildfire-fighting expenses," he said.

"Oregon picks up the first $50 million US of their fire suppression costs, and then if those costs go over $50 million US, Lloyds of London will pay the next $25 million US."

The costs rarely pass $75 million US, and by analyzing trends over several years, the state can budget predictably and commit resources elsewhere, McGillivray added.

Numerous cottages, cabins, docks and boathouses have burned down by the Parry Sound 33 fire along the Key River in northeastern Ontario. (Submitted by JJ Whitmell)

Alberta used model

Alberta took out similar policies in 2002 and 2006.

During a severe fire season in 2002, the province paid the first $175 million in costs, collecting a further $50 million insurance payout.

In 2006, the province chose to take out partial coverage, paying a $2 million premium to cover $13.3 million of potential damage. A relatively less destructive fire season meant that there was no payout, and the policy was not renewed.

In December 2016, Alberta's Department of Agriculture and Forestry published a review of its wildfire management programme during the 2015 fire season. It examined the 2002 and 2006 policies, and concluded that "insurance proposals appear viable and worth greater consideration," in the overall approach to risk management.

Town of French River, Ont., residents are praying for rain

4 years ago
Duration 0:44
Residents living in French River are dealing with a lot of smoke and hoping the fire remains under control so they don't lose houses.

McGillivray suspects there were political reasons behind the decision not to renew the policy.

"There's no reason why places like B.C. and Alberta and other places can't revisit it and do it again," he said. "The global reinsurance sector and the Canadian reinsurance sector is very open to this.

"They have the expertise, they have the capital, and all we need is political will."

Listen to the full conversation near the top of this page. 

This segment was produced by The Current's Samira Mohyeddin​ and Kristian Jebsen.


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