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Wildfire smoke from Canada drives insurer losses via civil authority claims
Canada and the U.S. are seeing severe smoke, with AQI readings in cities like New York City above 200 and Milwaukee hitting an AQI of 644, while coverage issues extend beyond fire damage.
Smoke from wildfires burning across Canada has driven dangerous air quality for millions across the U.S. Midwest and Northeast, with alerts reported across at least 17 to 18 states. Parts of Michigan reached the most extreme AQI category, while New York City recorded very unhealthy readings above 200 and Milwaukee posted its worst air quality on record at an AQI of 644, as Environment Canada said the hazy conditions are expected to persist into Friday with a possible additional surge over the weekend if winds shift.
According to the Canadian Wildland Fire Information System, roughly 850 to 859 wildfires were burning as of Thursday, with more than 100 out of control, most concentrated in northwestern Ontario. Canada has recorded 3,549 wildfires so far this year, burning more than 6 million acres, an area larger than the United Kingdom, while nine additional large fires are burning in northern Minnesota and adding smoke that has reached the eastern U.S.
Insurance Business reports that for insurers on both sides of the border, this season is generating losses that go beyond the physical fire perimeter. In Canada, the growing use of evacuation orders, road closures, and rerouted supply chains is showing up in business interruption and civil authority claims even when policyholders' properties were not touched by flame, including civil authority coverage when access is denied by a mandatory evacuation order and contingent business interruption coverage tied to supplier shutdowns.
The report also highlights how smoke damage can create a long claims tail. Verisk data on the 2025 Los Angeles wildfires found smoke damage accounted for about 30% of claims filed within the first 30 days, with an additional 35% of comparable smoke-related claims arriving as much as two years later, indicating that air quality losses can keep emerging after conditions improve.