“A massive injection of funds from provincial and federal governments, insurance companies and private sources will go towards the clean up and rebuilding effort in and around Fort McMurray,” says Pedro Antunes, deputy chief economist. “The wildfires will leave a sizeable dent in public finances, while property and casualty insurers will have to absorb the massive cost of claims.”
Most of the $5.3 billion will be absorbed by the insurance industry, which is estimating $3.6 billion in claims. In contrast, the federal and provincial governments covered the majority of payments in the 2013 Alberta floods (this is because flood insurance for residences was unavailable in the province and elsewhere in the country, while fire insurance coverage is almost universal).
As a result of the wildfires, an estimated 1,935 residential and 23 commercial/industrial structures were damaged or destroyed, and more than 12,000 auto claims are expected. Close to 45,000 claims are expected to be processed at an average payout of almost $80,000.
Initial estimates from Insurance Bureau of Canada suggest ommercial property claims will total $1.2 billion.
The Conference Board expects the impact of the wildfires to shave $456 million, or 0.1%, from real gross domestic product (GDP) in Alberta in 2016, the report says.
And, while the sheer size of the firefighting, emergency services and clean-up efforts will generate plenty of economic activity, that will not offset the losses in oilsands production in May and June.
Estimated production valued at over 47 million barrels and $1.4 billion in revenues will be lost to producers and the province in 2016. On its own, this lost production would take 0.5% out of economic growth in the province. Mining activity is expected to return to normal in 2017 and thereafter.
On the upside, the rebuilding effort is expected to boost economic activity in Alberta by $1.1 billion, or 0.4% of GDP next year. The Conference Board expects more than 2,500 homes to be rebuilt over the next three years along with repair works, furnishing of homes and purchasing of new cars, helping to boost residential construction and retail sales.
The increased economic activity will generate close to 16,000 person-years of employment between 2016 and 2019—employment would peak at almost 9,000 jobs next year. The recession has left the province with excess capacity and excess labour, especially in industries like construction, manufacturing and many business services that were hardest hit by the recession.