Wildfires raging through Alberta are now expected to be classed as a “reinsurance event” with the natural disaster looking to be the costliest natural disaster in Canada’s history.

The three largest local primary insurers have direct exposure that is limited to $170 million. With insurance losses estimated to range from $2.3 billion to $7 billion (C$9 billion), that will leave reinsurers facing a sizeable hit, and it might extend into ILS or alternative capital, believe analysts at Deutsche Bank.

The bank’s research team said the wildfires will “quickly eat into the reinsurance layers, potentially affecting also insurance-linked securities and alternative capital”, according to the Artemis.bm website.

It has also been reported that commentators at JP Morgan Cazenove have concluded that Munich Re, SwissRe and Scor could have their second-quarter profits impacted by up to 11 per cent as a result of the wildfires and earthquakes in Japan.

Jim Lynch, chief actuary at the New York-based Insurance Information Institute, agreed that the Canada wildfires now appear to be the largest natural catastrophe loss of the year to date.

Speaking to The Royal Gazette, he said there had been less costly catastrophes this year in the range of $1 billion and $2 billion, such a hailstone storms in Texas and tornadoes in Florida. But the wildfires that have caused the total evacuation of the city of Fort McMurray, and burnt vast areas of land in the region, would likely result in insured losses of between $5 billion and $7 billion.

However, he added: “The industry has more than enough capital to handle this. It can handle losses of $50 to $100 billion.”

He believes the losses will knock second-quarter profits of some of the bigger insurers, and there was always a chance that a smaller company might be hit hard if it has taken on a larger exposure in the region.

Mr Lynch does not believe there will be any great impact on the ILS sector. But he said much could depend on whether business disruption losses have been factored into estimates.

Beyond the evacuation of Fort McMurray, with its many associated businesses, the wildfires have forced the temporary closure of a number of mining and energy operations, including some of Canada’s biggest energy company Suncor Energy.

Fort McMurray is the hub of Canada’s oil-sands industry. It is estimated the fires have knocked out an estimated one million barrels of daily production and led to the evacuation of more than 80,000 people.

A second concern for the insurance industry has surfaced thousands of miles away with commentators suggesting there is a 50 per cent chance that the demise of the El Niño weather phenomenon in the Pacific Ocean will see the emergence of a La Niña weather pattern. Historically, La Niña has increased the likelihood of hurricanes forming in the North Atlantic and presented the associated risk of striking the US.

No major hurricane, defined as Category 3 or above, has made landfall on the US since 2005, although a few smaller hurricanes have, most notably Sandy in 2012.

Mr Lynch believes that despite the now 11-year absence of a major hurricane strike, insurers and reinsurers have not been taking things lightly, and are prepared should a major hurricane catastrophe occur.