Governments and insurers must work together urgently to prepare communities and households for wildfires, floods, windstorms and hail while improving Canada’s response to and recovery from these increasingly frequent and severe disasters.
In the last decade, over 880,000 Canadians and 87,000 businesses have suffered financial losses, due to damage caused by severed weather and natural catastrophes, with property and casualty (P&C) insurers paying out over $30 billion in claims for these types of events.
Beyond these numbers lie the hard-to-quantify costs to society in terms of lives disrupted, homes lost and financial hardship experienced by individuals, families and businesses. In addition, Canadian households pay deductibles and shoulder non-insured losses, while governments absorb impacts to infrastructure and rely on tax payers to fund disaster assistance. The vast majority of those affected are low- and middle-income Canadians and small and medium-sized businesses.
Ten years ago, Canada began to take significant action to tackle climate change. As a country, we focused on reducing carbon emissions, and have allocated $41.8 billion since 2016 to fund mitigation measures, such as those that affected or worked toward the reduction of Canada’s greenhouse gas emissions, including investments in the development of electric vehicles.1
But any serious plan to fight the impacts of our changing climate must include adaptation measures to help households and communities become more resilient to the extreme weather we are already facing. Adaptation measures that affect or work toward adjusting to the effects of climate change include investments in emergency preparedness.
In the words of respected hockey coaches, we have to play offence and defence, at both ends of the rink, if we want to win against climate change. However, only a tenth of the amount spent on mitigation – $4.1 billion – went to adaptation in those same 10 years.
This lack of spending on adaptation leaves us significantly underprepared for the growing impacts of our changing climate, as witnessed in the staggering outcomes of the catastrophic weather events of 2024, which followed close on the heels of the worst wildfire season in Canadian history in 2023.
In July and August of 2024, approximately a quarter of a million Canadians suffered financial losses from four major catastrophic weather events that caused $7 billion in insured losses (and much more damage that was uninsured). And these events occurred at a time when housing affordability and other cost-of-living challenges are top-of-mind for consumers everywhere. During the same two months, more than 7,800 businesses were interrupted by the disasters and forced to reduce financial activity in two of the country’s largest cities. And that’s not all. Over the entire course of 2024, insurers paid out over $8.5 billion in severe weather claims for a series of events that likely cost Canadian homeowners, business owners and their governments almost $20 billion overall (insured and uninsured damage costs combined).
Insured payouts for catastrophic weather events reached $1 billion in 2019 and 2020, $2 billion in 2021, $3 billion in 2022 and 2023, and over $8 billion in 2024. It is frightening to think where this trend may be headed.
Insurers are now close to paying out more in claims for a single event than has been allocated at the national level to climate adaptation over the past decade. Such a small investment in resilience and disaster preparedness is now costing Canadian families and communities. Given the worsening impacts of Canada’s severe weather events, Canadians need their governments at all levels to collaborate and protect residents from the ever-escalating number of severe floods, wildfires, windstorms and hailstorms.
Canada has done its part to lead the world on aggressively cutting greenhouse gas emissions. We’ve been all-in on offence. But now is the time to focus on defence and protect Canadians here at home.
The P&C insurance industry stands ready to do its part and work with governments at all levels. As we continue to help Canadians pick up the pieces and recover from last year’s severe weather events, the protection gap is growing and costs are increasing, affecting affordability and even availability of insurance coverage. Canadians need governments and the private sector to collaborate on solutions to protect them from the severe weather of today and tomorrow.
If that doesn’t happen, we should all get ready to live in an uninsurable country a decade from now.
1IBC conducted an analysis of spending on mitigation versus adaptation in the federal fiscal framework from 2016–2024.
