Severe weather events are contributing to spiking losses for insurers
This article was written for CMP by Jonalyn Cueto
Homeowners across Canada should prepare for significant increases in insurance premiums. Experts attributed the rising costs to record-breaking losses from natural disasters, inflation, and labour shortages in the construction industry, a report from CTV News highlighted.
The Insurance Bureau of Canada (IBC) reported $8.5 billion in insured losses in 2024, nearly tripling the previous year’s total. Severe weather events such as Calgary’s hailstorm, Quebec’s flooding, and the Jasper wildfire contributed to these staggering figures. Claims have increased by 115% over the past five years, while the cost of replacing personal property has surged by nearly 500%.
“2024 was the most devastating year on record in Canada for severe weather events,” said Jason Clark of the IBC. He emphasized the need for better disaster prevention measures, including investment in risk mitigation, infrastructure, and first responders.
Struggling to keep up
The rising premiums reflect insurers’ struggle to cope with mounting claims. Daniel Ivans, an insurance expert with Rates.ca, explained, “Insurance is a pooling of risk, and so when claims go up, costs go up.” While premium increases will vary by region, Ivans expects them to be substantial nationwide.
Inflation and rising construction costs compound the issue. Statistics Canada reports that residential building costs have increased by 66% since 2019, with home replacement costs up 24% during the same period.
High-risk areas under threat
The challenges faced by homeowners in high-risk regions, such as British Columbia and California, highlight a growing problem. In California, many wildfire victims were unable to secure insurance due to their location. British Columbians now fear a similar situation.
During periods of imminent wildfire threat, insurers in BC may temporarily restrict the sale of new policies, although renewals continue. The provincial government and the BC Financial Services Authority are monitoring the issue to improve insurance availability and affordability.
Peter Milobar, BC’s Conservative finance critic, warned of the strain these rising costs could place on households. “These are cost pressures that are going to be very difficult to manage for the average household,” he said, noting that many Canadians are already financially vulnerable.
Protecting livelihoods
Experts urge homeowners to maintain comprehensive insurance coverage despite the rising costs. Ivans cautioned against cutting corners, saying, “There’s a concept called saving pennies to lose dollars. We’ve seen a lot of instances where houses are fully burned down or demolished as a result of forest fires, as a result of flooding, where the foundation of the home is displaced. That’s somebody’s entire livelihood that they’re putting at risk for, something that they have no control over.”
To manage rising premiums, Ivans recommends shopping around for better deals and considering insurers outside one’s immediate region.
With extreme weather events on the rise, the future of home insurance remains uncertain. However, Clark stressed the importance of addressing the risks now: “The risk is present. It’s escalating, and we want to ensure that what we see happening south of the border doesn’t happen here.”