July and August have been particularly difficult for many residents across the country, as four consecutive catastrophic weather events (a single event where insured losses exceed $30 million) resulted in massive damage to homes, businesses and vehicles. While the initial damage estimates continue to be calculated, 2024 is in the running to be another record year for insured losses in Canada.
The sheer volume of claims resulting from the massive hailstorm in Calgary, severe flooding events in the Greater Toronto Area and Montreal, and the Jasper Wildfire Complex are stretching the capacity of the property and casualty (P&C) insurance industry. As recovery and rebuilding happen in the coming months, there will no doubt be bumps along the way while affected customers work with their insurers through the claims process.
Consider the recent experience of Nova Scotia. Last year, the province experienced two consecutive catastrophic events. From May 28 to June 4, 2023, an out-of-control wildfire ripped through communities in the Halifax Regional Municipality, with the worst impacts occurring in Tantallon. Then on July 21, an atmospheric river event led to significant flooding in parts of Nova Scotia, including Halifax, East Hants, West Hants, and Lunenburg and Queens. According to final estimates from Catastrophe Indices and Quantification Inc. (CatIQ), the two events combined caused more than $490 million in insured losses.
The volume of claims from these events required a large response from Canada’s insurance industry. To provide a transparent public review of the P&C insurance industry’s claims response and the factors impacting the claims landscape one year after these events, Insurance Bureau of Canada (IBC) recently released a report titled “One-Year Update Following 2023 Nova Scotia Wildfires and Flooding.”
The report found that one year after the two catastrophic events, over 88% of all claims related to the Tantallon wildfire and 90% of all claims from the atmospheric river event had been resolved and closed.
While this high claims closure rate is encouraging, many large claims remain open. The report paints a stark picture of the significant challenges that continue to impact the resolution of these claims, including scarcity of skilled labour, shortage of building materials and a lack of adjuster capacity.
The back-to-back disasters in Nova Scotia illuminated the challenges of managing two large claims events in quick succession and tested the resilience and adaptability of insurers, adjusters, restoration companies and emergency services.
Many of the same factors will present challenges in the claims resolution response to the recent catastrophic events across Canada.
Encouragingly, some regulators have been quick to assist. In Ontario, the Financial Services Regulatory Authority implemented temporary measures to help insurers support people impacted by the rainfall and flooding which occurred on July 16. These measures permitted insurers to use the services of employees of affiliated insurers and allowed licensed adjusting firms to use claims adjusters who have licences from outside of the province. In the wake of the Calgary hailstorm and Jasper Wildfire Complex, the Alberta Insurance Council was quick to approve expedited adjuster licensing of non-resident adjusters.
Unfortunately, regulators across Canada have not always uniformly adopted the same approach in response to large-scale catastrophic events, with some being reluctant to give sufficient consideration to the desperate need for more adjusters to process claims.
This is unfortunate. Adjuster and claims capacity is being stretched to unprecedented levels. While insurers have made great progress in adapting to ‘the new normal’ of higher frequency and severity of catastrophes (e.g. establishing expedited claims handling processes, creating specialized field teams for complex losses, improving their communication processes with claimants), it is increasingly a moving target. Severe weather events in 2023 caused over $3.1 billion in insured losses across Canada, one of the highest annual totals on record. Insured losses related to severe weather in Canada now routinely exceed $2 billion annually. By comparison, between 2001 and 2010, Canadian insurers averaged $675 million a year in losses related to severe weather.
Ultimately, the solution to the massive claims pressure associated with catastrophic events lies in creating a more resilient country. Canada is well past the point where we can allow new communities to be located in flood plains, or designed using building codes that do not do enough to prioritize resilience. Many communities that are prone to wildfire risk lack adequate fire proofing. As homes and businesses are repaired and rebuilt in the coming months, IBC will continue to advocate for public policy decisions that focus on resiliency to limit the significant impact these worsening weather events are having on Canadians.
