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Climate change is driving insurance rates higher in Canada

Climate change is not only driving up insurance rates in Canada but raises questions about private coverage even being available to some people.

Canada sends military to flood-ravaged Pacific coast
This aerial handout image taken by the City of Abbotsford shows flooding on the Sumas Prairie, British Columbia, Canada - Copyright AFP TAUSEEF MUSTAFA
This aerial handout image taken by the City of Abbotsford shows flooding on the Sumas Prairie, British Columbia, Canada - Copyright AFP TAUSEEF MUSTAFA

Climate change is not only driving up insurance rates in Canada but raises questions about private coverage even being available to some people.

Statistics Canada’s latest inflation report showed home insurance costs were up 8.2 percent nationally in June, compared with one year earlier. Increases were about 10 percent in Alberta, British Columbia, and Saskatchewan, and nearly 12 percent in Nova Scotia.

Granted, some of the increases are due to inflation, but CTV News Canada quoted Craig Stewart, the climate and federal affairs vice president for the Insurance Bureau of Canada. He said a big chunk of the increased premiums was because global reinsurance companies re-evaluated Canada’s risk profile and jacked up their prices.

A reinsurance premium is an amount of money that an insurance company pays to a reinsurance company to receive a specific amount of reinsurance coverage over a specified period of time.

Insurance companies purchase reinsurance to hedge their risks. In other words, reinsurance is a type of fail-safe for insurance companies in case too many claims are filed at once. If they didn’t have this as a backup, a company could easily go bankrupt if they are inundated with claims.

Stewart is saying that reinsurance premiums rose between 25 and 100 percent in the last year, and while not all of it was passed on to consumers, some of it had to be.

And this can be blamed on human-caused climate change. The Calgary Herald is reporting that global reinsurance companies re-evaluated Canada’s risk profile and jacked up their prices because new data showed that Canada is among the countries where climate change has affected insurance risks the most.

The Insurance Bureau of Canada reported last year that claims costs for personal property insurance averaged more than $7 billion annually over the last five years in Canada. That compares with $5.8 billion in the previous five years, and $2 billion a year in the late 1990s and early 2000s.

The bureau said severe weather caused about $3.1 billion in insured damage in Canada last year, the third-worst year on record. And there was no single major event — like the Fort McMurray wildfire in 2016 — accounting for a majority of the costs.

The costs were instead, spread across the country along with several major events, including the May derecho in Ontario and Quebec, post-tropical storm Fiona, flooding in Manitoba, and a series of major winter and summer storms in Ontario, Quebec, and British Columbia.

The biggest effect so far is the rising cost of premiums, especially with the tourism and hospitality industry in parts of western Canada. Many businesses haven’t been able to renew their insurance in recent years.

Stewart said it is not imminent, but possible, that those conversations might eventually happen 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.”

Meanwhile, in the United States, the climate crisis is fueling an insurance crisis, leaving homeowners struggling to find affordable coverage.

In June this year, Farmers Insurance announced in a company memo it will no longer write new property insurance policies in Florida, citing “catastrophe costs … at historically high levels.” AIG also stopped issuing policies along the Sunshine State’s hurricane-vulnerable coastline.

These insurers are following State Farm Insurance, California’s largest single homeowners’ insurer, which announced in May it had stopped accepting new applications for business and personal lines and casualty insurance in California,

In testimony before the Senate Budget Committee in March, Eric Andersen, CEO of consulting firm Aon PLC, said that reinsurance companies, the firms that help insurers pay out costs, have also stepped back from high-risk areas, particularly those vulnerable to flooding and wildfires.

So it is very possible that Canadians will be having serious discussions with their insurance companies a lot sooner than expected.

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We are deeply saddened to announce the passing of our dear friend Karen Graham, who served as Editor-at-Large at Digital Journal. She was 78 years old. Karen's view of what is happening in our world was colored by her love of history and how the past influences events taking place today. Her belief in humankind's part in the care of the planet and our environment has led her to focus on the need for action in dealing with climate change. It was said by Geoffrey C. Ward, "Journalism is merely history's first draft." Everyone who writes about what is happening today is indeed, writing a small part of our history.

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