The wildfire that has engulfed the north Canadian city of Fort McMurray has damaged or destroyed more than 1600 homes and structures and is threatening 19,000 more.

A state of emergency has been declared for the entire province of Alberta, while ratings agency AM Best says the impact on the insurance industry will be “vast”.

As firefighters struggle to control the blaze, loss adjusters have been rushed to the region in anticipation of a surge in claims activity. 

AM Best estimates the 7470-hectare fire will cause “significantly more losses” than the Slave Lake, Alberta, fire in 2011, which led to insured losses of more than $C700 million ($733 million).

The Fort McMurray fire is considerably larger, has already burned more structures and covers an area where average home values are much greater.

“This event has the potential to be the costliest catastrophe to impact the Canadian property and casualty market, possibly exceeding the nearly $C1.9 billion ($1.99 billion) in losses generated by the January 1998 ice storm in Quebec and the 2013 flooding in southern Alberta,” AM Best says.

The fire began in a caravan park and spread rapidly due to unseasonably high temperatures, low humidity and strong winds, according to catastrophe modeller AIR Worldwide.

Fort McMurray is an isolated community surrounded by forest, at the centre of one of Canada’s oil production hubs.

AIR Principal Scientist Tomas Girnius describes the fire as “catastrophic”.

“The local economy relies on natural gas and oil pipelines, forestry and tourism, all of which will be affected by this event,” Dr Girnius said.

“The major oil sands facilities in the area are not currently threatened by the fire, but several of the oil companies active in the area have shut down pipelines so they could evacuate non-essential personnel.”