John Connors’s collectible sneakers outlet in Halifax sustained damages following an extreme-weather flood this summer. He is waiting to find out its impact on his insurance premiums.Meghan Tansey Whitton
Nova Scotia continues to count the costs after torrential rains and flash floods inundated the province on July 22, claiming three lives and inflicting what officials called “unimaginable” damage to homes and infrastructure.
The storm had a severe commercial impact as well, swamping sections of a shopping centre in the Halifax suburb of Bedford and leaving stores under up to five inches of water. John Connors was among the business owners left to pick up and dry out the pieces.
“Between my insurance and my landlord, it’s been an ordeal, but I’ve always been somebody who can find a way and I’m not going to let this sink me now,” Mr. Connors says from his store East Coast Kicks, which has relocated temporarily within the Bedford Place Mall while the permanent unit, also in the mall, is repaired.
He said his unit was without power for 12 days after the severe weather hit and has been shuttered ever since. “It’s been an absolutely crazy time.”
Mr. Connors says his insurer has offered little in the way of communication as it conducts an analysis to gauge the value of damage to the structure and its contents, as well as of the forgone sales that would come on top of what he paid out of pocket during the store cleanup.
He’s currently waiting to learn about the impact on his premiums, assuming he is able to renew in an area he says is prone to flooding and in a mall that requires that its tenants have commercial insurance to operate.
He says his collectible sneaker consignment business is thriving for online orders with pickup and drop-off available and, “if all goes well,” the physical storefront will reopen with a fresh layout and new displays some time this month.
While storm surge and overland flood coverages have been excluded from most private property policies, commercial property insurance typically includes flood protection.
Insurance has become one of the major cost constraints for small business, with the level of concern way above the historical average.
— Simon Gaudreault, vice-president of research and chief economist, Canadian Federation of Independent Business
Experts say Canadian insurers have continued to offer commercial polices in most high-risk areas even in the face of catastrophic losses linked to climate change that hit $3.1-billion in Canada last year, according to Catastrophe Indices and Quantification Inc., the third-worst year for insured losses in Canadian history.
But with insured losses for flooding surging, some providers have started to deny flood coverage to residences and businesses on recognized flood plains, says Rob de Pruis, national director of consumer and industry relations at the Insurance Bureau of Canada.
It’s a development that has contributed to momentum for a low-cost flood insurance program supported by the federal government that could be available to eligible households as soon as next year.
Concerns about the rising costs for commercial insurance typically required for a small business and the increasing difficulty of obtaining sufficient coverage are mounting among Canadian Federation of Independent Business members, thanks to market forces including extreme weather, says Simon Gaudreault, CFIB’s vice-president of research and chief economist.
“Insurance has become one of the major cost constraints for small business, with the level of concern way above the historical average,” Mr. Gaudreault says, adding that some businesses are responding by increasing deductibles and implementing risk-management strategies.
Waterlogged merchandise at Connors’s consignment outlet in Bedford Place Mall, Halifax.Supplied/Handout
Mr. de Pruis notes some sectors have seen double-digit annual premium increases – prompting energy industry players to pursue alternatives to traditional commercial policies in the form of so-called captive insurance entities that are permitted in Alberta and British Columbia to provide insurance coverage for the well-financed companies that own and operate them.
He says information about the pace of commercial property insurance premium increases in Canada is limited but the newest survey from the Council of Insurance Agents and Brokers shows that commercial property premiums increased more in this year’s first quarter in the United States than they have in 20 years, with an 8.8-per-cent increase in the first three months, marking the 22nd straight quarter of overall premium increases.
Global insured catastrophic losses were estimated to have reached US$48-billion for the first half of 2023 with at least 16 billion-dollar events, marking it as the highest number of such events for a first half on record. The numbers are expected to continue to rise with the more recent wildfires in Maui and Hurricane Idalia in Florida, says the Fall 2023 Insurance Market Update from commercial risk insurer and consultant Aon PLC.
According to the report, by the end of the second quarter of 2023, Canada had experienced approximately $760-million of insured catastrophe losses – $343-million from an ice storm in Ontario and Quebec, followed by a $243-million loss from the Tantallon wildfire in Nova Scotia but not including the July flooding in the province. Severe convective or thunderstorm activity remains the costliest peril for insurers, accounting for 70 per cent of global losses in the first half of 2023.
“Commercial insurance customers seeking to limit insurance costs should focus on investing in risk-management programs to reduce the likelihood and severity of losses,” says Fabian Richenberger, executive vice-president of commercial insurance at Definity Financial Corp., the parent company to property and casualty insurance brands and companies in Canada, including Economical Insurance.
All of this is cold comfort to hotel operators in the hospitality industry in Canada where insurance costs have skyrocketed since 2019 for reasons including increasing claims and consolidation among insurance providers.
Charles McDiarmid, managing director of the Wickaninnish Inn on the west coast of Vancouver Island, says consolidation in the hospitality insurance market, along with rising payouts for natural disaster claims elsewhere, could be at least partly responsible for the 28-per-cent insurance premium increases for the business in each of the past four years.
And while Mr. de Pruis of the IBC says there are signs that premium increases are stabilizing across the commercial insurance market, Mr. McDiarmid said moderation couldn’t come too soon. “We’ll find out when we renew and I’m hoping for some relief because it’s really impacting the business.”
For Mr. Connors of East Coast Kicks, the case is still open as adjusters strive to arrive at a figure that accurately reflects lost sales during a lengthy business interruption after the summer’s historic flooding.
“They have to go through all of my sales back to 2019 [soon after the store opened],” using forensic accounting methods to estimate turnover during comparable periods in previous years, he says.
“Just how they are going to come up with a number is beyond me.”