After insurers paid out more than $3 billion last year following floods and wildfires in Canada, they may raise premiums because they view the country as “a riskier place to insure,” the Insurance Bureau of Canada (IBC) says.
Severe weather caused more than $3.1 billion in insured damage across the country in 2023, making it the fourth-worst year on record for insured losses, IBC said in a recent report. While 2023 was a record-breaking year for wildfires, flooding was also a major problem in nearly every region across Canada.
IBC said while the availability and affordability of wildfire insurance coverage will not see a significant change, over 1.5 million high-risk households now cannot obtain affordable flood insurance.
“It is also becoming harder for some households to obtain insurance for earthquakes and related hazards,” said the report.
The bureau said that extreme weather losses combined with inflation and rising building costs have all helped drive insurance premiums higher in recent years.
“As we build more and more homes to address the affordability crisis, ironically, what we’re seeing is that materials and labour costs are going up,” said Craig Stewart, Insurance Bureau of Canada vice-president of climate change and federal issues, “because of inflation, but also because of increased demand.”
But alongside severe weather losses and mounting costs to rebuild, there’s a third major factor influencing premiums: reinsurance, which is essentially insurance for insurers.
Canada is a higher-risk area for reinsurers than many other parts of the world, Mr. Stewart said.
For some regions, particularly Alberta and B.C., “reinsurers have raised their premiums for insurers operating in those areas,” he said.
Flooding on the Rise
The IBC report noted that insured “catastrophic losses” in Canada now routinely exceed $2 billion annually, and most of it is due to water damage.“Over the last decade, there have been more than 35 catastrophic flooding events across Canada in which insured losses exceeded $30 million per flood,” the report said. “Total insured losses from these events have averaged close to $800 million annually over the last decade.”
Ottawa committed $31.7 million to a national flood insurance program in 2023’s federal budget last March, but IBC says progress has “stalled” and the industry still doesn’t know to what extent insurers will be involved.
“Details of the program must be shared with our industry and the provinces this winter if it’s to be operational before the next federal election,” Mr. Stewart said. “Canadians now need the federal government to move forward with this program and announce details in the 2024 Federal Budget. The homes and financial health of over 1.5 million Canadians are at high and growing risk.”
Flooding is not the only issue facing Canadian homeowners, however. Wildfires and severe storms are also wreaking havoc causing hundreds of millions of dollars in damage last year.
The Okanagan and Shuswap-area wildfires in B.C. cost $720 million in insured damage, while the fires in Behchokǫ̀-Yellowknife and Hay River, N.W.T. came with a $60 million price tag.
Severe summer storms, including two confirmed tornadoes, cost $340 million in Ontario. Spring ice storms in Ontario and Quebec cost $330 million while summer storms across the Prairies accounted for $300 million in insured damages.
