Should the July 2024 flooding that resulted from the remnants of Hurricane Beryl reaching the Greater Toronto Area on July 16 be comparable to the Toronto flood that occurred July 8, 2013, Morningstar DBRS says the industry can expect inured losses of around $1-billion.
“The insured losses, while large for a single weather event, are entirely manageable for the insurance industry. We foresee no direct credit rating implications arising from the Toronto 2024 floods,” the ratings agency states in its most recent report, Toronto July Flooding May Cause Significant but Manageable Claims for Canadian Insurers.
The extensive flooding occurred after approximately 98 millimeters of rain fell in just a few hours. At the time, 167,000 customers also lost power. The firm says it arrived at the $1-billion figure by adjusting the 2013 Toronto flood losses for inflation.
The report notes that overland flood insurance coverage for homes, although growing in popularity, was introduced in Canada only somewhat recently and is not widely available, particularly in flood-prone regions. “Where available, it is sold as optional coverage,” they write.
One major mitigating factor is also the industry’s use of reinsurance to transfer risk, they add. “However, due to the prevailing hard reinsurance market pricing environment, we have noticed an increase in risk retention from insurers, which could lead to potential higher losses if severe weather events like this continue to happen,” they warn.
