The financial toll of climate disasters is becoming increasingly apparent, especially as Canada and the U.S. grapple with record-breaking insured losses. Jason Clark, National Director of Climate Change Advocacy at the Insurance Bureau of Canada (IBC), aptly noted, "The most expensive home is the one you build twice; particularly if it’s in a flood zone or wildfire area." This stark reality has never been truer for many facing the aftermath of devastating wildfires and flooding.
According to the IBC, 2024 has shattered records, marking the first year where insured damages from severe weather events exceeded $8 billion within Canada. This statistic is particularly alarming when you compare it to the previous high of $6 billion set following the Fort McMurray wildfires back in 2016. The report cites multiple weather-related catastrophes including the summer's destructive events—wildfires, floods, and hailstorms—which all contributed to the staggering loss total.
Particularly notable was the Calgary hailstorm, which alone caused $3 billion worth of damage within just over one hour. Wildfires and flooding made 2024 the most destructive year to date for uninsured losses, with over 250,000 claims filed, significant not just for the financial aspect but also for the personal loss many families faced.
Insurance agents and homeowners have begun to report growing concerns surrounding the industry's ability to handle such upheavals. Vik Salhotra, broker at Desjardins insurance, commented, "Claims are taking longer and contractors are harder to source," reflecting the mounting pressures on resources and the insurance claims process. The rising number of claims is straining both companies and their capacity to respond effectively, leading to longer wait times and increased costs.
Clark pointed out the trend indicating risks associated with certain regions are increasing, with many Canadian households—around 1.5 million—being unable to obtain affordable flood insurance due to their locations. "There’s an insurance gap for these homes... it’s not a question of if those homes will flood; it's when, how frequently, and how costly," he explained. This dilemma leaves homeowners at the mercy of nature without any protective insurance to cushion the inevitable damages.
Political advocacy is rising as Clark and others push for governments to take proactive measures against climate-related disasters. During the recent National Climate Adaptation Summit, stakeholders highlighted the need for increased funding to tackle infrastructure improvements, residential planning, and the development of comprehensive flood insurance programs. While the federal government introduced its National Adaptation Strategy and Adaptation Action Plan, critics contended these steps still fall short of what’s required, urging for more substantial investment and coordination across levels of government to mitigate these disasters effectively.
The challenge is not solely Canadian, as international trends reveal similar issues. For example, the Munich Re report indicated global losses from natural disasters hit $320 billion last year, with insured losses at $140 billion. Within this broader narrative, Surbhi Goel from Munich Re highlighted India's struggles, where only one state has implemented parametric insurance solutions to gain financial safeguards against climatic catastrophes.
It’s clear the insurance industry faces significant upheaval amid these climate-related challenges. The increasing unease among homeowners, stemming from rising premiums and shrinking coverage, reflects the urgent need for systemic change. Clark's warning resonates deeply: "The risk is going up; simultaneously, we aren’t seeing enough from governments across the country.”
Ryan Ness of the Canadian Climate Institute raised alarm over the infrastructure investments being targeted without sufficient risk assessments for environmental hazards, calling for proper screening processes and zoning policies to avoid aiding development in hazardous areas.
For homeowners, the advice is to remain vigilant. The prevalence of flood insurance—especially as just an add-on to standard policies—has left many unprotected, with recent studies indicating alarming levels of unawareness surrounding the need for such coverage. Salhotra remarked on the necessity of having water damage insurance, stating, "Water damage is actually the most prevalent and frequent claim."
Moving forward, the need for immediate action complicates matters as both climate change and insurance rates surge. Clark stated, "The data and the science are clear; climate change is driving increases...,” emphasizing the urgent need to rethink our approaches to property insurance and disaster preparedness. With premiums expected to increase and coverage shrinking, homeowners and governments alike must work together to adapt to this changing reality.