Global Courant
It’s been almost two years since a wildfire swept through Lytton, BC, destroying much of the village.
In everything, over $100 million in insured damages are included — though some residents were not covered at all, Mayor Denise O’Connor said.
“There were a lot of uninsured people living in the village and they are still in limbo,” she said.
A large part of the village remains behind construction fences. O’Connor said she hopes more of the village will be rebuilt soon.
These types of costly, complex recovery attempts are expected to become more common. Experts say the rise in temperatures will lead to an increase in extreme weather.
The final number of insurance payouts from this spring’s wildfire season won’t be known for some time yet, but all signs point to another costly period for the industry.
The federal government said Monday it expects above-normal fire activity across most of Canada through August.
Last year was Canada’s third most expensive on record, with$3.1 billion in insured damages due to flooding, rain and snow storms and the cyclone that swept through eastern Canada, the Insurance Bureau of Canada said.
Nine of the most expensive 10 years in Canada have occurred since 2011.
Home insurance rates are also rising and are likely to rise further in the coming years, due in part to the expected increase in extreme weather, experts say.
“If more money is being paid out by insurance companies, then there has to be a way to recover those losses. And so more claims paid means more rate increases,” said Daniel Ivans, an insurance expert at Rates.ca.
Home insurance and mortgage insurance increased by an average of 33 percent in the five-year period from 1 April 2018 to the same month in 2023, according to Statistics Canada.
Another hurdle is that ongoing wildfires can make it difficult or even impossible for residents to get home contents or car insurance — even if they are outside the evacuation zone — putting many purchases and renovations on hold.
A helicopter contracted by the province of Nova Scotia drops water on a hot spot in Yankeetown, NS, while an excavator breaks a fire earlier this month. (Communication Nova Scotia/The Canadian Press)
A warning sign from California
Despite these challenges, experts say the insurance industry in Canada is not yet in the perilous situation now seen in the United States.
In California, for example the State Farm insurance company recently announced it would stop selling new insurance policies due to the increasing likelihood of wildfires.
The company said it made the decision because of “historic increases in construction costs outpacing inflation, rapidly growing exposure to catastrophes and a challenging reinsurance market.”
For now, Canada is not at risk of a similar move among insurance companies when it comes to wildfires, said Craig Stewart, vice president of climate change and federal affairs at the Insurance Bureau of Canada.
“While wildfires are becoming more common across Canada, insurers in this country still treat them as accidents and we have not seen any insurer move away from insuring wildfire-prone areas,” he said.
In Canada, flooding remains the costliest extreme weather event, Stewart said. In this year’s budget, the federal government earmarked $31.7 million for a national flood insurance program aimed at covering high-risk properties that have struggled to get flood insurance.
The insurance industry has been pushing for such a program for years, so that residents in high-risk flood areas are covered.
“Ten percent of Canadian homes are at high risk of flooding — which is where we drew the line and said we can’t afford to insure those through the private market,” Stewart said.
Going forward, Stewart said there is a possibility that similar programs will be needed for other types of events, including wildfires.
“Whether from earthquakes, wildfires, hail or hurricanes, should any part of the country become predictably high risk and to the extent that it cannot be affordably insured, the program can be expanded, essentially to cover catastrophic insurance in those areas. counter.” he said.
Avoiding ‘corporate welfare’
In the future, these kinds of partnerships are likely to be needed, and the government will need to strike the right balance with insurers to ensure that homeowners – not private companies – benefit, said Prof. Daniel Henstra, co-leader of the climate risk of the University of Waterloo research group in Waterloo, Ont.
“The government policy intent of this program is to protect homeowners, but the political risk in my mind is that it’s basically the way it’s being cast as corporate welfare,” he said.
Henstra, who produced a background paper for the federal government comparing national approaches to flood insurance, said the federal government’s goal is to “reduce uncertainty around disaster financial assistance programs, which are expected to become much more expensive in the coming years.” become.”
“It was a big win for the insurance companies, or it could be a big win for them because they are companies held back by the deep pockets of the federal government.”
Workers clear debris after flooding flooded parts of Sainte-Marthe-sur-le-Lac, Que., in May 2019. Many homes in the community were a total loss. (Ryan Remiorz/The Canadian Press)
Public Safety Canada did not respond to a request for comment for this story, but referenced a statement on its handling of flood disasters.
The federal government said its “cheap flood insurance program” aims to “protect households at high risk of flooding and without access to adequate insurance.”
Tools for homeowners
Going forward, homeowners, too, will have to take more responsibility for the risks they face, Henstra said — but only if they have the resources to do so.
“It’s unfair to expect homeowners to do this unless the risk is known,” he said, citing detailed maps, such as those that exist in the UK, “where you can enter your postcode and you’ll get a detailed report of your risk.”
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“They need to know this through maps and searchable databases or through real estate websites,” he said.
“They need to know if this is a flood zone, if this is a wildfire zone, so at least they’re going to make an informed choice.”
