For the last 10 years, catastrophic losses due to natural and unforeseen disasters have been rising at a rate insurance experts did not predict, says a recent Canadian Underwriter article. In Canada, from 2009 to 2019, insurance companies paid out about $1.9 billion per year for catastrophic losses. That is more than four times the $422 million average for the previous 25 years. Expressed per capita and adjusted for inflation by the Canadian Underwriter, in 1983 the dollar cost per individual for catastrophic losses was $3.70. In 2019, that number had ballooned to $39.03, with the highest years corresponding with Canada’s worst natural disasters. When southern Alberta flooded in June of 2013, per capita costs reached $100.22. In 2016, the Fort McMurray wildfire resulted in the highest-ever total of $148.10.
Insurance companies are aware that being proactive may be our only choice when it comes to dealing with severe weather incidences. Simply sitting back and hoping for the best every time a major storm hits will not help to bring insurance costs down. Experts are recommending a range of ways to mitigate the damage caused by severe weather, including upgrading current properties and instituting guidelines for new properties. The hope is that a reduction in the number and severity of claims due to catastrophic losses will also result in lower premiums for property owners.
Ways to retrofit existing properties
The Office of the Auditor General of Canada’s “2016 Spring Reports of the Commissioner of the Environment and Sustainable Development” reports that more disaster financial assistance has been provided since 2009 than the previous 39 fiscal years combined. That is bad news for both property and business owners, as usually large increases in governmental expenditures are also accompanied by an increase in taxes.
Interestingly, though, the $235 million earmarked by the federal government for three different mitigation programs was “made little use of,” the auditor general says in the report. The main reason for this was a lack of clarity in identifying the most important information and tools for decision makers, something independent groups such as the Task Force For A Resilient Recovery are looking to change. Working with insurance companies, they are among those recommending making better use of existing public funds to retrofit existing buildings to withstand serious storms with less damage. They argue that investing in improving infrastructure to resist events like flooding makes long-term sense for reducing costs incurred because of insured losses, and also helps create a more resource-efficient and climate-friendly economy.
In their September report, the task force made several major recommendations, the first being to invest in climate-resilient and energy-efficient buildings. Recommendation 1.2’s objective is to “Accelerate the retrofitting of existing home and building stocks across Canada, creating jobs, improving energy efficiency and resiliency (including flood proofing), cutting energy costs, reducing energy poverty, increasing Indigenous participation, and advancing zero-carbon heating systems.”
The task force says they would accomplish this objective in several ways, including, “By adopting the new national model building code incorporating net-zero and resiliency measures in the next year, while also providing incentives for provincial uptake; collaborating with provinces and the private sector on adoption of building energy performance and resilience disclosure requirements; and investing $2 million to integrate a ‘ResiliGuide’ rating, to measure the climate resilience of buildings, into the EnerGuide for Homes certification system.”
They are referring to the Insurance Bureau of Canada’s (IBC) Resilient Home Retrofits Program Proposal of 2020, in which the IBC proposes the creation of a ResiliGuide home resiliency rating and labelling system similar to EnerGuide, which has helped increase the energy efficiency of products by introducing an official mark of the Government of Canada for those that match certain criteria. The IBC’s Resilient Home Retrofits Program Proposal would work the same way. The IBC says, “In the context of pandemic recovery spending, one of the greatest opportunities available to the federal government is to operationalize a plan to make Canadian homes more climate resilient.”
Some of the highlights of the retrofit program would include:
- Training advisors in home flood protection measures
- Applying a federal tax credit to incentivize retrofits
- Introducing a mortgage insurance incentive for those who have attained a ResiliGuide rating
The IBC estimates that these sorts of home improvements only cost about $2,500, which could greatly offset the $41,000 average cost of insurance claims due to flooding. Some may say the program should be taken even further to assist those in areas prone to devastating hail and wildfiresv… such as Alberta.
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