The World Economic Forum’s “Global Risks Report 2025” notes that environmental risks have become both more intense and more frequent since the international organization began publishing the annual report 20 years ago. It warns that severe weather events continue to be a top concern and are expected to become an even greater risk by 2035. All around the world, the burden of severe weather is becoming more evident.
Over the past four decades, Canada has seen a steady increase in the frequency of severe weather, including floods, and extreme water, ice, hail and wind events. This has translated to a steep rise in insured catastrophic losses.
Figure 1: Frequency of Insured Catastrophic Losses in Canada. Sources: CatIQ, PCS, Insurance Bureau of Canada (IBC) Facts Book, International Monetary Fund World Economic Outlook Database
Figure 1 clearly illustrates an increase in the number of severe weather events in Canada since 1985; the difference over the past 20 years is particularly stark.
When severe weather strikes, it affects entire communities – not only homeowners, but also the businesses that serve those communities. According to data from Catastrophe Indices and Quantification Inc., in the last decade over 87,000 businesses have suffered financial losses due to damage caused by severe weather and natural disasters. Over the past five years, insured losses for damage to homes, businesses and vehicles has doubled from $10 billion to a staggering $20 billion.
July and August 2024 saw four severe weather events. These events resulted in over $7 billion in insured losses and more than 250,000 claims, which is 50% more than Canadian insurers typically receive in an entire year.
In total, insured losses from severe weather in 2024 are estimated at $8.9 billion, which includes over $1.7 billion in commercial insured losses.
Figure 2: The four costliest catastrophic commercial losses in 2024 across Canada. Source: CatIQ under licence to IBC
Businesses need to prepare for extreme weather events
Severe weather not only causes physical damage, it disrupts a community’s normal economic activity. For businesses, it can halt operations, result in lost sales, and negatively impact supply chains and the flow of goods and services. Beyond financial losses, reputational damage to a business is a real threat if critical goods and services don’t get where they need to be due to a disaster.
All Canadian businesses are increasingly vulnerable to climate risk, and according to Business Development Canada (BDC), severe weather events have already negatively impacted 31% of Canada’s small and medium-sized enterprises (SMEs).The impact of a severe weather event for SMEs can be even more drastic and acute than for large businesses because they tend to have their assets concentrated in a handful of locations as opposed to having global reach and the opportunity to diversify supply chains. A BDC survey of 1,250 SMEs in March and April 2024 found that severe weather impacts all sectors of the economy; businesses that focus on manufacturing, services and transportation are especially vulnerable.
When a disaster strikes, businesses must be able to course-correct and implement their business continuity plans right away to prevent further risks from materializing. One way to lessen some of the financial impact is through risk transfer by purchasing adequate commercial insurance coverage. Today, over 100 commercial insurance companies compete in the Canadian marketplace, a 10% increase from 2018. In every province, businesses shopping for insurance coverage have more choices now than five years ago. The commercial insurance market also remains competitive, with many options available.
Adequate commercial insurance coverage also helps businesses recover from disaster more quickly. According to a February 2025 Bank of Canada report, while both government aid and private insurance are important in disaster recovery and rebuilding, there has been a shift toward a greater emphasis on insurance. A key reason for this emphasis is the growing frequency and severity of natural catastrophes in Canada.
While commercial insurance remains an important first line of defence, the cost of paying out insured losses is climbing for insurers. This means that the cost to provide insurance is also going up, and the cost may be passed to the business owner as their risk profile grows. This is even more significant if a business is located in a high-risk area, whether it be for flooding, wildfire or hail. Businesses must be resilient in the face of growing severe weather risks. Not only do businesses provide goods and services, but they create jobs and support the economic viability of communities. If a business cannot recover after a loss due to a natural disaster, it could end up closing, directly impacting its community.
Encouragingly, more businesses are recognizing the value of insurance as part of their risk management tool kit. In addition to having adequate commercial insurance coverage, BDC recommends businesses consider the following mitigation, prevention and recovery strategies to protect their most valuable assets.
In addition, IBC has a number of suggestions for property owners that include specific tips to protect against wildfire, flood, hail and wind damage.
Additional tools and supports tailored to SMEs can be found on the Institute for Catastrophic Loss Reduction (ICLR)’s website and in its “Open for Business: A Disaster Protection and Recovery Planning Toolkit for Small to Mid-Sized Business.”
How governments can mitigate the impacts of severe weather
Governments have a critical role to play in supporting businesses strengthening their climate resilience. This is perhaps even more important today given the current concerns in the economy, especially for Canadian businesses with cross-border exposure who are managing financial pressures due to updated tariffs from the United States. Climate risk is something that still needs to be managed and for this reason, governments should step up by providing funding for the business sector during these challenging times.
Figure 3: Federal climate spending in $ billions
The graph above clearly shows a lack of federal spending on climate adaptation to reduce the severity of future climate change impacts compared to the government’s current climate mitigation strategies and tax credits. This relatively small level of investment in climate adaptation leaves Canadian businesses significantly underprepared for the growing impacts of climate risk. Coupled with funding, governments need to make sustainable investments in infrastructure. Governments at all levels can help by doing the following:
Making targeted investments in both built and natural infrastructure that helps defend communities against floods
Implementing land-use planning rules that ensure commercial buildings are not built on flood plains
Adopting the principles of ICLR’s FireSmart wildfire prevention program in communities in high-risk wildfire zones
Implementing long-delayed updates to building codes that will better protect the structural integrity of businesses and ensure they address climate risks by requiring the use of more resilient methods and materials
Perhaps most importantly, discouraging new construction in areas that have been identified as being at high risk of a natural catastrophe
The challenges ahead
In this time of economic uncertainty, especially related to current trade issues between Canada and the United States, the business sector anticipates challenges ahead. Unpredictable severe weather and inflationary pressures can make it difficult for businesses to plan for the future. According to IBC’s 2025 Monthly Inflation Report for February, non-residential building construction costs have risen 39% since Q1 2019. These costs are currently outpacing the consumer price index (excluding food and energy).1 Noting these economic pressures, governments have even more reason to support businesses with prevention, climate adaptation methods and infrastructure investments well before disaster recovery efforts are required.
1 Source: February 2025 IBC Monthly Inflation Report
