Swiss Re’s Crosby: Canadian wildfire risk needs to be addressed further

Canada’s (re)insurance industry has made progress on addressing wildfire risk but must do more in the face of higher losses resulting from climate change and population shifts, according to Jolee Crosby, CEO of reinsurance, Canada and English Caribbean, at Swiss Re.

In an interview with The Insurer, Crosby noted that wildfires “are nothing new to Canadians” but recent years have been especially intense.

Canada's insurers and reinsurers have paid more than $5bn in wildfire claims in the past 10 years, much more than any previous decade.

Following a record-breaking season last year, Canada’s first major wildfires of this year broke out in British Columbia in early May.

“It has been quite busy,” Crosby said of the wildfire season so far. “But when you take a step back and you think about the last year, especially with it being so difficult, the wildfire season never ended.”

Fires from last year continued to smolder underground during the mild winter and then reignited in the early months of this year. These are known as “zombie” or holdover fires.

On average, wildfires burn 2.5 million hectares of land in Canada each year. Some years are far worse, however, resulting in multi-billion-dollar insurance payouts.

“So it’s something that Canadians have come to know well every year, and it's something that we have to address,” Crosby said.

The executive said the increase in wildfires is partly being driven by climate change, but it is also caused by people, with population shifts impacting activity. The British Columbia government has estimated that 40 percent of wildfires are caused by human activity, with the rest by lightning.

“One of the things that we've noticed is that people are starting to move more outside of the cities because they want more space,” Crosby said. “So people are living in the wildland urban interface, or the WUI. As cities get bigger, people are moving further out into the areas that haven't been inhabited before in the past, and that then gives rise to more wildfires.”

Industry working to address wildfire risk

Crosby highlighted that the industry has done a lot to understand the wildfire dynamic.

For example, she noted work done by The Institute for Catastrophic Loss Reduction (ICLR), an educational group established by Canada’s property casualty industry.

ICLR examined the 2016 Fort McMurray wildfire – Canada’s largest insured loss – to assess why some homes located in the midst of the destruction survived with little to no damage while others nearby were destroyed.

The institute commissioned the inspection of side-by-side properties and assigned each one a hazard rating based on factors including roofing and building materials, the presence of vegetation/fuel, and distances to the nearest wooded area.

“When they tabulated the results, they found that nearly three quarters of all surviving homes were rated as ‘low’ hazard compared to their neighboring counterparts that were lost,” Crosby said.

The study concluded that implementing widely accepted mitigation practices greatly increased the probability that a home will survive future wildlife events.

The ICLR analysis showed that every $1 spent implementing the National Guide for Wildland Urban Interface Fires to make a new home more fire resistant saves owners, tenants, and society up to $35.

Crosby also noted that many individual insurance companies have various programmes aimed at helping consumers mitigate the risk of wildfires.

In addition, Swiss Re has teamed with Bellwether, a project at X – the moonshot factory, part of Google’s parent company Alphabet – to support insurers in more accurately forecasting future wildfire risks.

This allows Swiss Re to integrate public data into CatNet, its online natural hazard atlas, to help insurers underwrite in wildfire-prone areas with more confidence and in turn offer coverage to more people.

Another important risk in Canada is earthquakes. The west coast of the country has the greatest risk of earthquakes, but the east coast is also exposed.

“On top of that, which is even more alarming, is that with earthquake coverage being optional in Canada, 40 percent of homeowners in British Columbia and more than 90 percent of homeowners in Quebec don't purchase earthquake insurance currently.

“So this is a big area of potential gap in insurance coverage that we're concerned about. And that's one of the reasons why we want to continue to educate people on the importance of this type of coverage so we can help to build a more resilient society,” Crosby said.

More work to do on DEI

Crosby took on the role as president and CEO of Swiss Re Canada and English Caribbean in July 2023, having previously led the global L&H underwriting and medical reinsurance team.

She is the latest in a string of successive female CEOs for Canada, following Sharon Ludlow, Veronica Scotti, and Monica Ningen.

Discussing whether this is a sign that DEI is making progress, she said: “I'm really proud that Canada walks the walk when it comes to DEI and you see a lot of incredible female leaders in the Canadian insurance industry. But it's a journey, and we still have some way to go.”

Crosby said that Swiss Re is continuing to drive more of a DEI-inclusive work culture. Since 2017, the company has conducted pay equity reviews and audits addressing potential pay disparities.

“For the last three years, we've published our relative and adjusted gender pay gaps. It's something that I'm also tracked on as a leader,” she said. “We’ve reduced our adjusted gender pay gap from 1.7 percent in 2021 to 1.4 percent in 2023.

“There is still much more work to do. But it's a focus of our company to continue to drive a diverse, equitable and inclusive strategy. Not just women, but all different types of backgrounds, as well as diverse candidates. We need to have companies that reflect our consumer base.”

Discussing how the insurance industry can make itself more attractive to potential employees, Crosby noted that a challenge is that the insurance workforce is getting older.

“We want to continue to attract more talent,” she said. “There is a perception that our industry can be slow or boring in comparison to other careers. But I know from my own career - I've been with the company 26 years - that it's an exciting, rewarding career path to have.”

Crosby said the industry does a good job of selling the value of its products but can do a better job of selling how rewarding a career in the industry is.

“We know from research that employees today want a career where they can have a sense of purpose and are making a difference,” Crosby said.

“What more fulfilling of a career is there than standing up a global economy and helping people in the face of catastrophes that they've dealt with, either on the property and casualty side or even on the life and health side,” she added.

Crosby noted that Swiss Re continues to invest in its employees to provide growth opportunities. This includes rotations, as well as development and mentoring programmes. It also has outreach programmes to attract new graduates from universities.