Canada’s property and casualty insurers paid out a record amount in 2013 as they grappled with the spiralling cost of catastrophic weather.
Claims on the industry reached $3.2-billion last year, after floods, hail and ice storms caused devastating damage across the country, Insurance Bureau of Canada (IBC) said Monday. The claims total is roughly twice the next highest year on record and a tenfold increase from the losses sustained a decade ago.
“In 2013, the terrible effects of the new weather extremes hit Canadians hard,” Don Forgeron, chief executive of IBC, an industry association, said in a statement. “From the Alberta floods last summer to the ice storms in Ontario and Atlantic Canada over the holidays … bad weather hit insurers hard, too.”
As natural disasters grow more frequent in Canada and around the world, insurance companies are raising premiums, revamping coverage and investing in new technologies that can help them better predict extreme weather events.
Insurers are growing especially conscious of dangers related to flooding and water damage. In recent years, those events have exceeded fire as a source of insurance claims in Canada, a reversal of the historical norm.
The widespread rainfall and flooding that swept through Southern Alberta last June clocked in as the most expensive natural disaster in Canadian history. Insured damages from these storms exceeded $1.7-billion, according to IBC.
Extensive storms in Toronto last summer also broke records as the most costly insured natural disaster in Ontario’s history. Insured damages reached $940-million as thousands of homes and businesses were flooded and lost power.
“Canadian communities are seeing more severe weather, especially more intense rainfall,” Mr. Forgeron said.
Some industry executives have warned that climate-related disasters threaten the industry’s financial health. “The extreme weather events from the summer have made it clear that the sustainability of home insurance in its current form is being challenged,” said Charles Brindamour, chief executive officer of Intact Financial Corp., on the company’s most recent conference call.
Both insurance companies and reinsurers – the companies that provide insurance to insurers to offset the risk of large claims – are fighting back by developing technologies to help better deal with unusual climactic events.
Reinsurance firm Swiss Reinsurance Co. Ltd. has invested in a satellite mapping system called CatNet that outlines precise flood, tornado and hail zones to help insurance companies quickly understand the extent of storms, and let adjusters process claims quicker.
The system also helps insurers predict where damage is likely to occur, and plan for the expense of future claims. Swiss Re has said that while 2013’s catastrophes were severe, they were within the scope of the company’s expectations, based on the system’s models.
Insurers are also placing a new emphasis on educating their customers and encouraging them to take protective measures. Intact, Canada’s largest property and casualty insurer, is offering incentives for customers who install sump pumps and backflow valves, for example.
Insurer Aviva Canada Inc. said it supports groups such as the Institute for Catastrophic Loss Reduction, which educates the construction industry and those responsible for building codes, as well as insurers and all levels of government.
IBC has created a system that assesses a municipality’s weak spots for potential damage from sewer backup. The predictive tool, called the MRAT (Municipal Risk Assessment Tool), identifies where a city’s infrastructure is weak now, and where it may be vulnerable in the future.
“An increasingly changing climate means we must become more innovative in the way we handle weather-related catastrophes,” said Lucy Yank, vice-president of customer, communications and brand at insurer RSA Canada. The company is investing in energy efficiency programs, and will e-mail customers and brokers with suggestions to minimize the impact of impending storms.