The head of Canada's largest property and casualty insurance company is calling on governments, businesses and communities to prepare for future catastrophic weather. As natural hazard risks become more frequent and severe, Intact Financial Corp.'s chief executive officer Charles Brindamour says many stakeholders will have to work together "to ensure sustainability and affordability" of insurance products and recovery efforts.
"I want to stress the fact that the change is real," he said in an interview Tuesday afternoon. "We've seen it, we're paying for it, we're trying to change the impact. But at the end of the day, this is one of those things that will call for everyone to chip in. This will be a societal effort…."
The water has receded in Southern Alberta and the Greater Toronto Area, but the expenses of putting businesses and communities back together after last month's flooding are just rolling in for insurers. Intact said Monday that flooding in Alberta will cost more than $300-million, or $105-million net of its reinsurance coverage. Flooding that hit the Greater Toronto Area resulted in another $170-million of insurable damages. The company provides home, auto and business insurance to 3.6 million cars and 2.2 million residences across Canada. It also covers 443,000 commercial properties and 477,000 commercial vehicles.
Mr. Brindamour said Alberta's floods could reopen the conversation about what kinds of flooding and severe weather damage should be covered by insurance in Canada. Other insurers have also said they're keeping an ear to the ground for the mention of regulatory changes that could require them to provide country-wide overland flooding coverage, rather than just sewage backup protection. There's a possibility that insurance products and provisions could change based on governments or communities calling for better protection.
"Certainly these sorts of events put pressure on the overall returns of the industry, which in my view is an average of 10 per cent in the first place," Mr. Brindamour said. Intact has been charting the trend of increased disasters and costs for as long as 10 years.
He said the capital markets may be able to bear some of the costs of future disaster recovery through securities such as catastrophe bonds – an idea that has gained traction in recent years – but the prevention steps taken before the next big disaster will have the most impact.
Mr. Brindamour says he's optimistic that some light shed on the need for improved infrastructure and preparations for flooding may also improve other natural hazard preparation plans, such as earthquakes in British Columbia. "We are working with the Insurance Bureau of Canada to develop better co-ordination when it comes to earthquake-prone areas in Canada," he said.
For shareholders, the disaster loss estimates that the industry supplies are more immediately useful. "It's always good to have the information out there. It removes uncertainty on the stock and I think you could get a bit of a relief rally when you get knowns put on unknowns," said BMO Nesbitt Burns insurance analyst Tom MacKinnon.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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