Wildfires keep northern Ontario real estate on its toes as insurers pause new coverage

Photo: Ministry of Natural Resources of Ontario (posted on X).

The wildfire emergency unfolding across northern Ontario is creating ripple effects in the housing market, where insurance restrictions are forcing some real estate transactions into limbo as far south as Thunder Bay.

“It’s a difficult situation up here right now,” said Nathan Lawrence, broker and partner at Royal LePage Lannon Realty and mortgage broker at DLC Mortgage Excellence in Thunder Bay.

The fires have hit rural and backcountry communities, with First Nations, fishing lodges, cottages and homes among those most affected. Government officials reported 132 active fires in the region as of Sunday afternoon.

Lawrence said insurance companies have put a restriction on issuing new binder letters – temporary documents providing coverage before an official policy is ready – in the areas where the fire is active. Even policies in the City of Thunder Bay are being considered on a case-by-case basis, he said. 

“As a result of it, if you’ve got offers in play right now with insurance conditions, you may not be able to satisfy those conditions on a reasonable timeframe given there is this moratorium on issuing binder letters,” he said.

“There is also the risk the insurance company could rescind or pull back a binder letter prior to the actual closing if they discover the closing is in their restricted areas.”

Lawrence said he hadn’t heard of anyone at his brokerage experiencing any troubles closing firm deals, though agents are being encouraged to keep a close eye on transactions scheduled to close over the next week and a half. 

At his mortgage business, he said he anticipates running into a few situations over the next week or so with clients requiring financing, as mortgage lenders mandate insurance coverage. 

‘Cooler heads prevail’

In an email to members, Erin Nadon, CEO of the Thunder Bay Real Estate Board, warned that wildfire-related insurance restrictions could complicate real estate transactions by delaying buyers’ ability to secure financing. 

She encouraged members to advise clients early about potential delays and allow extra time for insurance-related conditions.

Lawrence said the key to negotiating right now is baking in extra time for unknowns. 

“On the front end of the translation, we’re trying to be very proactive to allow some additional time for that insurance condition, because there’s not much you can do without insurance, especially when it comes to financing and closing.”

“We’re doing this to protect the buyer and the seller so there’s no surprises.”

He said fires add an element of complexity to a tight market in Thunder Bay. 

“We have a lot of buyers, and we could use a little more supply,” he said, adding that under these conditions, the pressure of trying to secure a transaction for a buyer is already “a bit stressful.”

Royal LePage Lannon Realty hasn’t delayed putting listings on the market, he said.

“As long as all the parties are working together, it’ll result in delays, and hopefully not complete cancellations of transactions. Cooler heads prevail. We manage and support our clients through it.”

Treasured recreation areas

Vince Mirabelli, broker at Remax First Choice Realty Ltd. in Thunder Bay, says he’s helping friends to evacuate their cottages in affected areas. 

On the business side, he said he pulled one listing off the market in an area that came under an evacuation order, and he has another in the vicinity of the fires that he’s waiting to launch. 

Fishing destination Lac des Mille Lacs is one of the areas that has seen the most fire damage. Mirabelli says listings are hard to come by there as families hang onto them for many years. 

“I remember a client asked me to help them find a place out there, and it took two years,” he said. 

“People love it out there. It’s some of the best fishing in northwestern Ontario, and in Canada.”

He said the devastation extends beyond private homes and businesses, and pointed to Namaygoosisagagun First Nation, whose members were evacuated by boat as their community burned to the ground. 

Insurer restrictions linked to evacuation orders

Rob de Pruis, national director of consumer and industry relations of the Insurance Bureau of Canada, a trade association for insurance companies, said restrictions on new policies are typically eased as evacuation orders are lifted. 

“It’s up to individual insurance companies. All insurance companies are competitors. There is no industry standard,” he said. “There is no legislation or regulation surrounding this particular issue.”

He said British Columbia is a leader in introducing fire-related clauses in real estate offers, with B.C. Financial Services Authority (BCFSA) publishing a resource for agents to explain how to word it. 

“We often see financing clauses. There could be a subject to insurance clause, or fire insurance clause, in there as well,” said de Pruis.

Leaving no room for coverage gaps

de Pruis said a standard insurance policy remains active even under evacuation. He said a home seller who has a firm deal could hold off from cancelling their insurance on the date the deal is set to close. That way, if the transaction is delayed, coverage would be maintained on the home until the buyer can obtain coverage themselves. 

“That’s where the communication between both sides needs to take place,” he said.

He said a homeowner, if they’re facing an expiration of their policy, can also avail of what’s known as a Declaration of Emergency Endorsement, which automatically extends the insurance expiration date if the government declares an official emergency.

“There are solutions. They’re not well known,” said de Pruis. Some people think that once these moratoriums are in place, nobody can get insurance for the rest of the year. That’s just not true. They are just that – temporary.”

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