Nobody gets excited about paying property insurance. But anyone who has invested in a home or business understands the importance of protecting it. Insurance provides peace of mind against unforeseen events, so anything that undermines the availability of affordable insurance is cause for concern. It turns out that climate change is doing just that.
Insurance markets depend on reliable and predictable information, and climate change is throwing a wrench into this predictability. Insurers need to set rates to cover claimed losses and make a profit. Rates must be affordable so enough people purchase insurance policies, or the system will fail. Climate change contributes to more intense extreme weather events, such as storms and floods, prolonged droughts and wildfires. Insurers have lost confidence that they can pay for losses now that "once in a hundred years" events are happening more frequently. Insurers are raising premiums to protect themselves, and insurance rates are increasing and becoming unaffordable for many.
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In 2013, Canada experienced a record $3.2 billion in insured loss claims. Major flooding events in Calgary and Toronto and severe winter storms in Atlantic Canada battered communities and left residents seeking compensation for damages. The loss is even higher if you include all the damage that isn't covered by property insurance in Canada.
Surprisingly, overland flood insurance is not available in Canada. Policies only cover flooding from backed-up sewers, not overflowing riverbanks. Canada is the only G8 nation where such insurance isn't offered.
Protecting Canadians from extreme weather events doesn't just fall to the insurance sector. Municipalities must re-evaluate their zoning bylaws for new infrastructure to avoid building on flood plains or areas vulnerable to sea-level rise. While many large Canadian municipalities are already doing this, others are behind. Our best response is to reduce the greenhouse gas emissions that contribute to climate change and extreme weather events. The prospects of affordable insurance in a future with two degrees of warming are bleak.
While Canada works to adapt its insurance system, we must not lose sight of our fortunate position when it comes to insurance availability. Figures from reinsurer Swiss Re show the gap between insurance haves and have-nots. Despite suffering the majority of casualties and economic loss from extreme events, Asia, Africa and Latin America account for only 20 per cent of insured losses. Insurance simply isn't available or affordable for many people around the world. These populations are feeling the brunt of climate change with a much smaller safety net, and that needs to change. Canada can do its part by playing a more constructive role at the international negotiating table. December's UN climate summit would be good place to start.