Canada's 2026 Wildfires Burn Above Average but Spare Insurers So Far: Morningstar DBRS Points to Remote Fires, Strong Combined Ratios and the Real Risk in Alberta and British Columbia

Canada's 2026 wildfire season has burned more land than average, but so far it has not produced the insured losses that a large area might suggest. That was the assessment from the credit rating agency Morningstar DBRS in a report released in late July 2026 and covered by Canadian Underwriter and Reinsurance News on July 23 and by Wealth Professional on July 24. The picture described below is therefore a snapshot of that date, and conditions can change quickly in a fire season.

The figures first. Year-to-date, about 2.95 million hectares had burned in Canada, above the 10-year average of about 2.55 million hectares for the same period. Nearly 900 wildfires were active, and the most significant were concentrated in remote northwestern Ontario and northern Quebec. Canadian Underwriter reported that Ontario had 179 active wildfires covering more than 732,000 hectares, according to the province's forest fire map. Large northwestern Ontario fires caused evacuation orders, transport disruption and smoke concerns across Canada and parts of the United States. In contrast, British Columbia had burned about 43,000 hectares against a 10-year year-to-date average of about 373,000 hectares, and Alberta about 18,000 hectares against about 380,000.

Why this matters for insurers is the location. Morningstar DBRS said the main fires were in areas with low insurance penetration, property values, population density and commercial activity. It therefore expected direct property claims to remain contained, and claims for evacuation, additional living expenses and business interruption to be manageable. The agency's assistant vice-president for global insurance and pension ratings, Steve Liu, said Canadian insurers remain well positioned to absorb moderate wildfire losses, and that a heavier run of major wildfire and other severe weather losses would likely be required to exhaust annual catastrophe budgets, which would also trigger reinsurance protection. The report noted that the outcome depends more on whether fires reach major population centres or areas with large amounts of insured property than on the total area burned.

The financial position of the industry is the second reason. Major publicly traded Canadian property and casualty insurers reported combined ratios below 95 per cent in 2025 and the first quarter of 2026, according to the agency, supported by better underwriting, stronger capital and more favourable reinsurance conditions. Reinsurance pricing fell in 2026 as global capacity increased. Premium increases on personal property over recent years also helped insurers keep pace with claims costs and more frequent catastrophes. The comparison point is 2024, when insurers paid a record catastrophe bill; Canadian Underwriter cited $9.1 billion, while Insurance Business, cited by Wealth Professional, put insured catastrophe losses at $8.5 billion, so the two reports use different figures for the same record year and readers should treat the exact number with care.

Where the real risk lies is the third point. Insured wildfire losses have historically been largest in Alberta and British Columbia. Morningstar cited the 2016 Fort McMurray fire, the 2024 Jasper fire and several large British Columbia fires between 2017 and 2023. Insurance Business, in the Wealth Professional report, said Fort McMurray forced more than 80,000 people to evacuate and destroyed over 2,400 properties and is now valued at more than $4.8 billion in insured damage in 2025 dollars. Those losses helped push home insurance rates up 5.28 per cent nationally in 2025 and up to 9.07 per cent in Alberta. The northwestern Ontario fires were unlikely to spread directly into southern Ontario, but changing weather could create new fires near populated areas. A severe scenario, the agency said, would involve several major fires across multiple provinces at once, which could pressure catastrophe budgets, trigger reinsurance and raise reinstatement costs.

Claims can arise even for properties that never burn. Wealth Professional, summarising Insurance Business, reported that evacuation orders, road closures and rerouted supply chains increasingly produce business interruption and civil authority claims. The Insurance Bureau of Canada said civil authority coverage can apply when a mandatory evacuation order blocks access to an insured premises, and that it is separate from standard business interruption cover. Contingent business interruption cover can extend to firms whose suppliers shut down because of fire-related closures elsewhere. Smoke damage is covered under a standard home policy, subject to its terms, the bureau told Canadian Underwriter in June, and fire and smoke damage are treated the same way. Verisk data on the 2025 Los Angeles fires, cited in the same report, showed that smoke made up roughly 30 per cent of claims filed in the first 30 days, with a further 35 per cent of comparable smoke claims surfacing as much as two years later in past events, which suggests that smoke claims can be slow to emerge.

Public policy is part of the picture. After the 2023 season, the federal government expanded the FireSmart programme, and in 2025 federal and provincial governments and the Canadian Interagency Forest Fire Centre announced about $104 million in combined FireSmart investment. Canada has no dedicated public-private insurance backstop for extreme wildfire losses; Morningstar noted that 2026 discussions on federally supported catastrophe reinsurance have focused on earthquakes, not wildfire. Canadian Underwriter also reported political friction, including calls from First Nations leaders for an inquiry into Ontario's wildfire response and a dispute over remarks by the US president, but those developments are not insurance findings.

The takeaway for readers is conditional. Insurers entered the season in a strong financial position, and the fires so far have been far from the places where insured values are concentrated. The risk is that the rest of the season, or the next, could bring fires closer to those places. For businesses, the practical lesson is to check whether policies include civil authority and contingent business interruption cover, which respond to disruption even when no property is damaged.