How the feds can help insurers prevent annual $2-billion Cat losses

Insured damage for severe weather events across Canada reached $2.1 billion again last year, and $2-billion annual Cat losses are quickly becoming the new normal, according to Catastrophe Indices and Quantification Inc. (CatIQ).  

This is a steep incline compared to the period between 1983 and 2008 where Canadian insurers averaged only $422 million a year in severe weather-related losses.

“The insurance industry is built to withstand very severe events…however, we are concerned about these escalating numbers,” Craig Stewart, vice president of federal affairs, IBC, says. 

This is an opportunity for Canada to prioritize climate defence through their national adaptation strategy, Insurance Bureau of Canada says.  

IBC says the national adaptation strategy, currently under development by the federal government, must propose concrete actions to protect Canadians from the growing severity of weather events. They are calling on the 2022 federal budget to allocate funding for its implementation. 

“The country needs a national game plan to address these events, both in terms of federal emergency response, improved recovery, and also improved financial resilience for both home and business owners across the country,” Stewart says.  

Adaptation refers to “initiatives and measures to reduce the vulnerability of natural and human systems against actual or expected climate change effects,” according to an IBC report. “Various types of adaptation exist (e.g., anticipatory and reactive, private and public, and autonomous and planned).”

Five advisory tables started their work on the strategy in October. They delivered recommendations on how the federal government could achieve its goals to protect Canadians by 2030 and 2050 last week. It will be reviewed by government ministers before being released publicly in April. 

After that, Stewart says the second phase of the strategy — consultation on achieving short-term actions within five years to meet the 2030 and 2050 goals — will start after April.  

“That national consultation will start this spring. That will then be wrapped up by next fall and then the entire plan will be released by the end of the year,” Stewart says. 

While the strategy will plan to address all perils, flood events have been rising in severity through the years.  

In 2020, IBC advocated for the federal government to establish the Task Force on Flood Insurance and Relocation. Its work commenced in January 2021, and it is scheduled to submit its final report by spring 2022.  

“We know that the losses are going to continue to escalate and as a result, we need to be innovative,” Stewart says. “We need to figure out how to keep the Canadian population insurable by pursuing partnerships with governments to come up with new insurance programs, such as the high-risk residential flood insurance pool that we’re currently negotiating with the federal government.” 

He says the federal government has committed to completing all high-resolution flood mapping within the next three years. The maps will be used to determine who is at the highest risk from flooding and potentially lobby to exclude construction from occurring in high-risk areas. 

“Canada is a complicated country and flood, in particular, is a complex peril to defend against,” Stewart says.  

“[The] strategy is an effort to have a national game plan, implicating a range of actors who need to coordinate to address the scale of the perils that we’re currently seeing. And we believe that strategy needs to set hard targets,” Stewart says.  

“It’s about all of society’s actions. What are the roles that insurers should play? What are the roles that consumers themselves can play?” he adds.

Feature image by iStock.com/gaiamoments