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So far, 2014 has been punishing for Canadian insurers, marked with hailstorms and floods, such as those in Alida, Sask., in July.Don Healy/The Canadian Press

The effects of climate change could lead to stormy conditions for global insurers – and most aren't ready for that forecast, research shows.

Insurance companies operating in the United States show a "profound lack of preparedness in addressing climate-related risks and opportunities," according to not-for-profit sustainability advocacy group Ceres's Insurer Climate Risk Disclosure Survey.

A study of 330 companies, representing 87 per cent of insurance premiums issued in the U.S., awarded top ratings to just nine firms – almost all of which of are large, global insurers and reinsurers, such as Munich Re, Swiss Re and Allianz.

The warning comes as the frequency and severity of natural catastrophes is on the rise, with potentially devastating consequences for both homeowners and businesses as expanding global-supply chains increasingly spread risk around the world.

The insurance industry isn't acting quickly enough to mitigate the financial impact of these looming weather threats, said Mike Kreidler, chair of a climate change group at the National Association of Insurance Commissioners' (NAIC), a U.S. regulatory group that developed the survey analyzed in the Ceres report.

"There is no doubt that an early effort to adjust policies, premiums and insurance investments will result in less dramatic impacts later on, thus avoiding and reducing losses that we can already anticipate," Mr. Kreidler wrote in the report.

Canada's insurers are already feeling the effects of increased weather disasters.

Last year, the Canadian property and casualty insurance industry was hit by the highest losses from catastrophic events in Canadian history, at a cost of about $3.4-billion, according to the Insurance Bureau of Canada. Insurers responded by adjusting property coverage and pricing, and began offering incentives for homeowners taking preventive measures against flooding.

So far, the weather in 2014 has also been punishing. Intact Financial Corp., the country's largest property and casualty insurer, said in August that summer catastrophe losses, primarily from severe hailstorms, could soar as high as $120-million. The third quarter tends to be rough for catastrophic losses, and the market will get a closer look at the extent of the damage when Intact reports financial results on Nov. 5.

While Intact is well capitalized and diversified, the outlook for losses in the future is "disconcerting" said Stephen Boland, an analyst at GMP Securities, in a recent note to clients. More frequent and severe weather events have "caused insurers to reassess exposure limits and reinsurance treaties to ensure adequate coverage is in place," he said.

German insurer Munich Re is calling on governments to commit to reducing emissions of greenhouse gasses. Roughly 90 per cent of natural disaster losses come from atmospheric-weather-related events, such as storms, hail and tornadoes, which are influenced by climate change, the company says.

At the United Nations Climate Change Conference in Paris next year, member countries are expected to sign the first universal climate agreement.

"We need a legally and globally binding protocol or treaty so each country knows how many reductions are needed," said Peter Hoeppe, Munich's head of geo risks research. "If they're only voluntary pledges, this doesn't help. History has shown many countries have pledged to reduce this or that and nothing has happened."

Canada's resiliency could be improved with the introduction extensive flood mapping – highlighting the risk of rising water in certain areas – and a national flood-insurance program for homeowners, Mr. Hoeppe said. Such commitments would cost the government hundreds of millions of dollars.

The extensive flooding that devastated thousands of homes, businesses and public spaces in southern Alberta last summer amounted to the costliest weather disaster in Canadian history, with insurers covering more than $1.7-billion in claims, as governments set aside close to $3-billion more to cover uninsured losses.

The pain of that disaster for homeowners and governments prompted some investment in flood mapping, but insurers say more should be done.

Canada had a lot of momentum, Mr. Hoeppe said. "But people forget quite quickly."

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