A new paper from shareholder advocacy organization, Investors for Paris Compliance (I4PC), makes a bold assertion: That insurers should sue climate polluters, heavy emitters, for costs incurred during climate catastrophes that are known to have been made worse by emissions.
“Polluting companies are making billions in profit while offloading the resulting costs to others. This is a form of unjust enrichment that also threatens the stability of systems such as the home insurance market,” say authors of the new I4PC report, Climate damages & Canada’s looming home insurance crisis: Who pays?
That said, the advocacy organization points out that insurers are unlikely to take the lead in such matters, as they themselves are underwriters and major investors in the fossil fuel industry. “The majority of Canadian insurance companies are thus far avoiding this conversation,” they add. The organization’s analysis indicates that all together, the seven largest Canadian-based property and casualty (P&C) insurers and their parent companies had over $19.5-billion invested in fossil fuel assets at the end of 2023.
In a discussion with the Insurance Portal, Kiera Taylor, senior analyst with I4PC, says for the system to maintain stability, costs will need to be recovered, making lawsuits inevitable. She and the report characterize the period as being very much like the years leading up to the moment when tobacco companies found themselves being on the receiving end of government and consumer lawsuits.
Who pays for adaptation measures?
“Right now, the industry is not discussing who pays. Who pays for these adaptation measures? Who is paying for increased premiums and increased uninsured losses, damage to public infrastructure, higher firefighting costs and higher disaster funding? All of these things, right now, are landing on the policyholder and the taxpayer,” she says.
“As these costs grow, and we know they’re growing – the industry talks about how they’re growing, if those costs are still just going to land squarely on taxpayers and policyholders, that’s unsustainable and unjust.” The report further notes that uninsured damages – estimated to be $24-billion in 2024 – are also borne by policyholders and taxpayers.
She says insurers using their right to subrogation to recover costs from major emitters would bring some stability to the system. “Insurers use their right to subrogation all the time. It’s common practice,” Taylor says. “That just needs to extend to climate damages.”
Record claims
In a complaint to the Financial Services Regulatory Authority of Ontario (FSRA), meanwhile, the organization notes that the insurance industry acknowledges that the climate crisis is driving record claims. “The strength and stability of the home insurance sector is on a collision course with consumers’ ability to pay,” they write.
The association’s demands include:
- Having financial institutions carry out realistic risk assessments. “There is a need for better communication of key assumptions and judgements in climate change modelling and scenario analysis,” the report states.
- Having regulators like FSRA add transparency to the market and investigate what is currently happening in provincial home insurance markets.
- That FSRA conduct public analysis regarding home insurance consumers’ ability to pay.
- At a minimum, have the regulator request pooled public disclosure regarding home insurance rate hikes, including rationale, flood and fire mapping and insurance company net zero plans. “Ontario consumers and regulators are only aware of premium price increases once they have already happened and have no basis to assess whether any one company’s increase is consistent with the provincial or regional average, or what factors went into the price rise and whether those were legitimate,” the FSRA complaint states. “A core aspect of FSRA’s mandate is to ensure the strength and stability of the home insurance sector. This is being steadily undermined by climate-driven insurance unaffordability.”
They add that there is no indication that FSRA currently monitors these trends with affordability in mind. Nor has it established thresholds for what constitutes unsustainable or destabilizing pricing in home insurance.
“There is no projection as to whether and where home insurance price hikes will end, but climate impacts are projected to accelerate for the foreseeable future, with claims continuing to grow exponentially, and these costs continuing to be passed along to consumers. Taken to its logical conclusion, this is a recipe for system failure,” they write.
Attribution science, meanwhile, has evolved considerably in recent years. “For example, climate change made Quebec’s 2023 fire season around 50 per cent more intense, and seasons of this severity at least seven times more likely,” they state. “It has now evolved into end-to-end attribution frameworks that connect emissions from identifiable sources directly to measurable physical and economic damages, which can be applied to meet legal standards for admissibility.” In short, they say “attribution science lays the blame clearly at the feet of those most responsible and litigation and legislation provide tools for cost recovery.”
Citing a number of studies, the paper also notes that the global economy would be $28-trillion richer were it not for the extreme heat caused by the top 111 companies by carbon emissions.
According to the report and the FSRA complaint:
- In some areas, including Shuswap in British Columbia, Calgary and Carleton Place, Ontario, home insurance rates have spiked between 25 per cent and 300 per cent in 2024. In other high-risk areas, premiums jumped between 50 per cent and 70 per cent in a single year.
- Since 2019, Canada has experienced a 115 per cent increase in the number of claims for personal property damage.
- Insurers paid out $1.01 in claims and operating costs for every $1 they earned in premiums in 2023 and 2024. In Alberta, insurers paid out $1.18 in claims and operating costs for every $1 they earned in personal property premiums.
- Toronto’s July 2024 flooding caused $1-billion in insured losses. Including uninsured losses, total damages came in around $4-billion.
- Roughly 80 per cent of Canadian cities are built on floodplains.
- From 2014 to 2019 the average selling price of Canadian homes in communities that experienced catastrophic flooding dropped by 8.2 per cent.
- The average Alberta homeowner is paying $660 more for home insurance in 2025 than they did in 2015.
- From 2014 to 2024, home insurance rates in Ontario rose by 84 per cent, including a 12.7 per cent increase in 2024 and a 7.2 per cent jump in 2025. Ontario policyholders pay $519 on average more for home insurance in 2025 than they did in 2015. (Homeowners outside of Carleton Place, Ottawa, reported a year over year jump of 72 per cent.)
- During the 2023 renewal cycle, catastrophe reinsurance premiums for property in Canada rose by an estimated 25 to 30 per cent for loss-free portfolios and 50 to 70 per cent for portfolios that had experienced recent loss events.
Source: Investors for Paris Compliance.
The industry’s conflict of interest
The insurance industry has a conflict of interest by investing and underwriting fossil fuel activity to the tune of billions of dollars, thereby promoting ongoing emissions and greater climate damages, and passing these costs to consumers.
– Investors for Paris Compliance (I4PC)
The report asserts that if the industry is to explore its subrogation options, it will first need to get through the fact that the Canadian P&C industry is engaged in extensive fossil fuel investing and underwriting.
“Canadian financial institutions aren’t known for being first movers when it comes to climate risk management,” Taylor says. “Insurers are still financially entangled with fossil fuel companies. It doesn’t make sense for a company that is still profiting from these companies to then sue them for costs.”
She adds: “If a company is still going to invest and underwrite in this business that is harming their business, then it’s likely they’re not ready to take the step of recovering costs from that business.”
The FSRA complaint is more pointed. “The insurance industry has a conflict of interest by investing and underwriting fossil fuel activity to the tune of billions of dollars, thereby promoting ongoing emissions and greater climate damages, and passing these costs to consumers,” it states. “Canadian P&C companies are helping to drive climate damages.”
Although it further notes that some companies are making efforts to reduce this conflict of interest by adopting some best practices for net-zero alignment, “these efforts are inconsistent and fall short of both global peers and what is required by climate science.”
Fair treatment
The report and the complaint both also invoke the Fair Treatment of Customers in Insurance guidance from regulators.
They say, unlike auto insurance where premium increases and their inputs are relatively transparent, home insurance premiums are decided on in a black box, comparatively, leaving consumers, municipalities and builders to make less than informed decisions.
“There is little transparency regarding the role of profit-taking by insurance companies,” they say. “There is (also) little transparency regarding the climate related factors determining coverage, such as flood and fire maps considered proprietary to the industry, yet having real-world implications for homeowners, municipal planners and developers,” the FSRA complaint states. “In some cases, residents in Ontario have spent tens of thousands on protective flood measures and were surprised to find they were still denied flood coverage. Even when insurance is available, homeowners in high-risk areas may face significant out-of-pocket costs due to insurer-imposed payout caps.”
The complaint also takes issue with the fact that insurers use one set of climate related information to adjust coverage, while public floodplain maps, where available, are often outdated or incomplete. “An estimated 94 per cent of Canadians living in high-risk areas remain unaware of their flood risk,” they state. “Cities can therefore approve developments using data that conflicts with data used by insurers. Municipalities are unable to know precisely where to approve new developments and developers may incur losses.”
And while they say the industry’s promotion of the proposed National Flood Insurance Program may be laudable from vulnerable Canadians’ perspectives, “this can also be seen as a form of offloading by the industry to be able to focus on more profitable clients.” More, they note that this is a form of double dipping into Canadians’ resources, as many will pay for the national program with their taxes, while also paying higher premiums, themselves.
Industry’s response
It’s a new concept and a new discussion.
– Kiera Taylor
The industry’s response – to promote adaptation, meanwhile, they say, is inadequate. It is also noted as being another cost transferred to homeowners and taxpayers.
“The insurance industry appears largely a one-note orchestra in its public response to mounting damages: adaptation. Many say that both households and governments should spend to harden property against extreme weather – another form of cost transfer,” they write. “Insurance companies may require a mix of such activities in order to secure lower rates or improved deductibles.” Although, as already noted, some clients have found out too late that these may not always make a difference in insurability.
“Meanwhile, provincial and federal regulators charged with maintaining system stability remain largely on the sidelines as costs mount for homeowners and taxpayers with no end in sight.”
The FSRA complaint also accuses the Insurance Bureau of Canada (IBC) of remaining largely silent on the need to reduce emissions that are causing climate change. The IBC, although contacted by the Insurance Portal for this article, would not answer any questions about the criticisms presented in the paper and complaint (the IBC received a copy ahead of publication back in November), only issuing a statement that says the IBC shares the I4PC’s concerns about escalating climate risks.
“Canada benefits from a highly competitive and stable home insurance market with over 100 insurers offering home insurance products – even amid record claims and global reinsurance cost pressures. Insurers are committed to maintaining coverage and advocating for solutions that address the underlying risk, not just its symptoms,” the IBC’s statement reads.
Taylor, meanwhile, concedes that the attribution concept is new. “This is probably one of the first times, if not the first time, that this will be brought up to Canadian P&C insurers publicly,” she says of the paper and its thesis that affordability and system stability requires climate cost recovery. “It’s a new concept and a new discussion.”
