Wildfires burning across Canada and parts of the United States have continued to fuel a regional air quality crisis, disrupting major cities and airports while raising new concerns for insurers over escalating catastrophe losses, according to news reports.
As of August 5, the Canadian Interagency Forest Fire Centre (CIFFC) reported 747 active wildfires across the country, with more than two-thirds classified as out of control.
In total, nearly 3,900 wildfires have burned more than 6.5 million hectares this year, marking one of Canada’s largest fire seasons on record, the reports said.
The scale and intensity of the fires have had transboundary effects. Smoke from the blazes has drifted across the border into the United States, triggering air quality alerts for more than 81 million people in 16 states, including Minnesota, Wisconsin, Michigan, New York, and Massachusetts.
Hazy skies and health warnings have affected major urban centres from Minneapolis to New York City. Detroit, New York, and Chicago ranked among the world’s worst for air quality on Tuesday, according to IQAir, prompting delays such as a ground stop at Boston Logan International Airport due to low visibility.
Though conditions improved in parts of Canada, including Montreal and Toronto, air quality remains a concern as high-pressure systems continue to trap smoke over large areas. Wildfire smoke, even at moderate levels, has been associated with increased respiratory and cardiovascular health risks – exposures that may drive up health-related insurance claims, particularly in regions already managing the long-term impacts of previous smoke events.
In the western US, the Gifford Fire in California has grown into one of the state’s largest of the year, scorching more than 82,000 acres in Los Padres National Forest.
As of Tuesday, the fire was just 7% contained, with hundreds of homes under threat and worsening conditions expected due to continued high temperatures and low humidity. Red flag warnings remain in place for parts of Nevada, Utah, Colorado, and Wyoming, the reports said.
For Canada’s insurance sector, this year’s wildfire season adds to a growing list of climate-related claims that are straining capacity and testing underwriting models. Events like the Jasper wildfire in 2024 resulted in nearly $900 million in insured damage. With current wildfires burning near residential and commercial areas, insurers are again bracing for significant losses related to property damage, business interruption, smoke contamination, and mass evacuations.
The impact is not limited to property claims. As air quality worsens, insurers may face increased costs tied to health and disability coverage, particularly in areas where prolonged exposure to smoke has become more frequent.
According to health officials, breathing wildfire smoke over several days can be equivalent to smoking multiple cigarettes daily, posing long-term health risks that are not yet fully captured in current risk models.
The volatility is prompting industry calls for stronger mitigation and adaptation measures, including land-use planning reforms, wildfire risk reduction through fuel management, and resilient construction standards in high-risk zones.
Several Canadian insurers have also advocated for more coordinated emergency response mechanisms, warning that the scale of recent disasters has outpaced local preparedness efforts.
Insurance stakeholders are urging governments at all levels to take more proactive steps to limit future losses. These include investing in community-level risk mitigation, such as FireSmart initiatives, and subsidizing home retrofits to improve resilience to wildfire and smoke-related damage.
There are also renewed calls for the federal government to establish a national coordinating body for disaster response and recovery. Unlike other G7 countries, Canada does not yet have a central agency tasked with managing large-scale emergencies, a gap insurers say undermines long-term resilience.
As wildfire activity shows no signs of slowing, the insurance industry is warning that without comprehensive action to address both climate risk and structural exposure, communities and policyholders will face mounting financial pressure.
