We Didn’t Start the Fire: Effects of a Natural Disaster on Consumers’ Financial Distress

Abstract: Global climate change is increasing the frequency and severity of natural disasters. We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray Wildfire, the costliest wildfire disaster in Canadian history, on consumers’ financial stress. We focus on the arrears of insured mortgages because of their important implications for financial institutions and insurers’ business risk and relevant management practices. Our findings suggest that wildfires have caused more mortgage arrears in severely damaged areas, with both economic and statistical significance. For other areas with relatively minor damage, the increase in arrears is small and statistically insignificant.