Lamphier: Cost could be $5B.

Too early for insurer of 278 municipalities to estimate costs

With Alberta’s flood waters receding and the biggest cleanup in provincial history underway, the enormity of the economic damage is becoming apparent.

Initial estimates from BMO Capital Markets insurance analyst Tom MacKinnon suggest total damages to homes, businesses, vehicles and other private property are likely to run between $3 billion and $5 billion. That’s roughly 20 to 30 times the amount of damage caused by southern Alberta’s last major flood, in 2005.

Insured losses are expected to equal about 75 per cent of the final tally, or roughly $2.25 billion to $3.75 billion, MacKinnon said in a report issued Monday.

Meanwhile BMO senior economist Robert Kavcic told the National Post the flood that left downtown Calgary underwater for days could shave 0.1 per cent or $2 billion off Canada’s economic growth in June.

Forgone tourist dollars could inflate that total, he warns. The Calgary Stampede, which injects well over $300 million into the city’s economy, is set to start in just 10 days.

Meanwhile, Kananaskis Country Golf course announced Monday that it will close for the 2013 season, the Calgary Herald reports, and several other courses in the flood zone — including Inglewood Golf and Curling Club, Glencoe Golf and Curling Club and Cottonwood Golf and Curling Club — may also be at risk of closure.

For private insurers like Intact Financial, which has 17 per cent of Alberta’s personal property market, 11 per cent of the commercial property market and 20 per cent of the personal auto market, MacKinnon figures the net impact on earnings could be between $1 and $1.50 a share.

The picture isn’t as clear for John McGowan, CEO of the Alberta Urban Municipalities Association (AUMA) and its subsidiary Alberta Municipal Services Corp. (AMSC).

To help municipalities cut their operating costs, the latter provides a wide variety of services — including general insurance — to some 278 cities, towns and villages across Alberta, including the flooded communities of Canmore and High River.

With Premier Alison Redford pledging $1 billion toward flood relief and federal Immigration Minister Jason Kenney, the senior minister for southern Alberta, confirming “very significant” support from Ottawa, it’s too early to say what the costsharing formula will be.

In any case, the cost to repair or replace damaged public buildings, vehicles, key public infrastructure and other assets will have to be assessed on a case-by-case basis, says McGowan.

“Keep in mind it’s just around the rivers and the real impact of that flooding is mostly going to be in downtown Calgary and in the homes and communities around the river,” she said.

“The more important factor for commodity markets is actually what went on in China last week in their banking sector, and you’ve got oil prices moving down.”

Global commodity prices have also come under renewed pressure from last week’s comments by Federal Reserve chairman Ben Bernanke, who indicated that a stronger U.S. economy may lead the Fed to withdraw some economic stimulus my mid-2014.

According to Buchanan, the sectors most likely to be hit by the floods will be tourism, as travellers opt to stay away from the area altogether, and agriculture, because farmers will have to contend with sub- optimal growing conditions following the rains.

“The issue there is that people are making their summer travel plans now, and even if they manage to restore some services people may decide not to go there this summer,” he said.

“Don’t forget, if you’re talking about the eastern Rockies, you’re dealing with an international travel crowd and people have to make plans in advance. They may not always be quite sure what the situation on the ground is.”

One area that will predictably see a boom is the construction industry as the city begins to recover.

“They’re going to have to repair a lot of infrastructure, both private property that’s been damaged as well as public infrastructure like highways and railroads,” Buchanan said.

“It’s still pretty early going at this point, but we do see a sizable (overall) impact over the next few quarters.”