The flooding in southern British Columbia will be the largest natural catastrophic disaster for the insurance industry in 2021, says Marcos Alvarez, DBRS Morningstar’s head of insurance.
Insurance companies have not yet been able to provide estimates of what the total cost of damages for the B.C. flooding could tally up to, but Mr. Alvarez said in the past 10 years Canada has had several flood events across the country that each surpassed $1-billion in insurance claims.
“Increases in average annual insured weather-related losses are higher in Canada than at the global level,” Mr. Alvarez said. “This is consistent with the notion that the warming of Canada’s climate is happening at about twice the rate of the global average.”
In recent years, the Canadian insurance industry has seen an increase in the number of natural disaster claims, including losses because of floods, hail storms and wildfires.
In June, 2013, Calgary had some of the province’s heaviest rainfall and flooding, displacing 100,000 people and causing more than $5-billion in damages. Of those damages, about $1.6-billion were insured. In the same year, Toronto experienced flooding that cost insurers almost $1-billion in claims.
Flood insurance is fairly new to the Canadian market and, according to the Insurance Bureau of Canada, or IBC, provides policy holders with specific types of water damage coverage, such as overflows of lakes and ponds, and surface water from a heavy rainfall or melting snow, as well as from ground water entering a home.
Until 2015, flood insurance coverage was not available in Canada from either the government or private insurance companies. The Calgary floods of 2013 sparked the industry to make changes, and several insurers stepped in to provide additional coverage.
The insurers most likely to be affected by the latest B.C. flooding, which peaked on the weekend and into Monday, are those with the largest market share in the province for property insurance policies. They include Intact Financial Corp., Lloyd’s of London, Wawanesa Mutual Insurance Co. and Aviva Canada Inc.
But polices are not always available in high-risk areas, said Aaron Sutherland, vice-president of the IBC’s Pacific and Western regions.
According to the IBC, 5 per cent of B.C. homeowners are unable to purchase flood insurance because they live in an area that is deemed too high risk – such as an area that is close to a waterway or is an area that is susceptible to higher levels of rainfall.
Moreover, only about 50 per cent of B.C. policy holders have insurance policies that include coverage for damages from flooding.
Part of the gap, Mr. Alvarez said, is that unlike fire insurance, which is mandatory in every homeowner’s insurance policy, flood insurance is not automatically offered in a standard application.
To address this issue, IBC has been working closely with both the federal and provincial governments to create a system of broader flood insurance coverage.
“These recent floods add to the growing evidence that there is an urgent need to create a national flood insurance solution,” Mr. Sutherland said. “We need to be having frank conversations about where we are building and limiting development in areas that are putting Canadians at risk.”
B.C. homeowners who have been affected by the floods can reach IBC at 1-844-2ASK-IBC.
Trained insurance representatives can help residents navigate their home, business or vehicle insurance policies, including questions on whether they have flood coverage that will provide additional living expenses for shelter and food.
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