Extreme weather risk raising questions over insurance affordability

Extreme weather risk raising questions over insurance affordability | Insurance Business Canada

Catastrophe & Flood

Extreme weather risk raising questions over insurance affordability

Conversation needs to happen ‘sooner rather than later,’ leader says

Catastrophe & Flood

By
Mika Pangilinan

The increasing frequency and severity of extreme weather is sparking concerns about the affordability of private insurance coverage in Canada.

Statistics Canada’s latest inflation report shows home insurance costs rose by 8.2% across the country in June compared to the previous year.

The higher costs were particularly pronounced in Alberta, British Columbia, Saskatchewan and Nova Scotia, where increases were reported to be between 10-12%.

Stewart, who is IBC’s vice president of climate and federal affairs, told the Canadian Press that reinsurance premiums went up 25% to 100% over the last year.

He said Canada is among the nations most affected by climate change-induced shifts in insurance risk, and approximately 10% of Canadian households are considered too high-risk to secure adequate insurance coverage.

A national flood insurance program is being developed to bridge this gap, but Stewart said it should also have the flexibility to expand coverage to include other weather events if needed.

IBC previously reported that that annual claim costs for personal property insurance exceeded $7 billion annually over the past five years, compared to $5.8 billion in the preceding five-year period and $2 billion annually in the late 1990s and early 2000s.

Unlike prior years where a single major event dominated insured damages, the 2022 costs were more evenly spread across several different incidents including the May derecho in Ontario and Quebec, as well as post-tropical cyclone Fiona.

In response to the challenges posed by natural catastrophes, several insurers in the US have opted to withdraw from high-risk states. Stewart didn’t rule out the possibility of a similar scenario in Canada.

“The amplification of these events over the last five years just happened quicker than anyone could have imagined, so unfortunately we may be having that conversation sooner rather than later,” he said.

What are your thoughts on Canada’s extreme weather risk? Tell us in the comments.