Floods, high winds, repeated freezing and thawing episodes: the manifestations of climate change are multiplying and constantly reminding us that the time has come to adapt. For property and casualty insurers, these extreme events mean a sharp rise in claims and losses, but also a pressing question: how can we build more resilient homes, better able to withstand the vagaries of the climate?
In 2020, the Canadian Climate Institute estimated that weather events attributable to climate change had tripled. The value of the damage caused by these storms between 2010 and 2019 is estimated at $18 billion.
Two years later, the Institute predicted that by 2025, climate change would cost the country $25 billion annually in losses, representing 50% of the nation's projected growth in gross domestic product.
In announcing his National Adaptation Strategy in 2022, federal Minister of Environment and Climate Change, Steven Guilbault, hoped that by 2025, one in two Canadian households would have taken steps to prepare their homes for climate change.
According to data provided to the Insurance Portal by Environment and Climate Change Canada, between 25% and 32% of Canadians took such measures from 2021 to 2024. The federal department reports that citizens are motivated to take these measures when they know specific solutions to certain risks, are convinced of the effectiveness of these measures, and are also confident in their ability to make the changes.
The insurance industry lags behind
However, the incentives offered by insurers to encourage Canadians to adapt their homes are few and far between.
The [insurance] industry is lagging behind,” says Élène Levasseur, Research and Education Director for Architecture sans Frontières Québec (ASFQ). “What we're seeing is that, on the one hand, many insurers are trying to get out of flood zone coverage, and on the other, others are trying to find culprits.”
Levasseur, who holds a doctorate in planning and a master's degree in environmental sciences, points to the 2023 urban floods in Montreal as an example. “Some insurers considered the backups to be the city's fault, because its water management system was deemed obsolete. So they refused to compensate their clients until the city upgraded its system.”
Other than refusing to compensate, some insurers will require their policyholders to take legal action against their municipality, she adds.
“But if the city's stormwater network is saturated, it's not just a problem for the municipal administration,” says Levasseur.
“It's a little peculiar,” she adds. “When people experience a fire, insurers will compensate them. But, as soon as water is involved, they try to find another culprit.”
However, she says that several insurers are aware of the situation and are involved in the search for lasting solutions.
But they're not the only ones who need to get involved.
“Even if we sometimes point the finger at insurers, or at the city, citizens must also understand that there is a risk associated with water, a risk as important as that associated with fire or earthquakes,” underlines Levasseur. Just as our homes are now designed to be earthquake resistant, they should be better designed to be resistant to water, she contends.
Revising the building code: an obstacle course
To oblige all future constructions to take into account the risk of damage caused by water, the National Building Code of Canada needs to be revised. But unlike climate change, which is evolving rapidly, bureaucracy is much slower.
“Roughly speaking, there's often a gap of five or ten years before a good idea is written into the federal code, and then percolates down into the provincial codes,” observes Levasseur.
Furthermore, residential buildings are not subject to the same regulations as commercial buildings, so municipalities and cities also have to adjust their regulations. “That could take decades,” she comments.
To try to speed up the process, ASFQ works directly with municipalities, helping them to modernize their regulatory frameworks.
“We're looking mainly at bylaws that result in homes being poorly adapted,” she explains. For example, in some areas of Montreal, multi-unit buildings have basement parking, which is not a good idea in a bowl-shaped zone. Regulations should be reviewed to prevent this type of development.
Making a house too airtight creates new problems
A new house is not necessarily more resilient than an older one, notes Levasseur.
“The older they get, the more we try to make (houses) waterproof. We apply coatings to the foundations to make them watertight. But this also means that the building breathes less, and water can't get out as easily after entering, whether through drains, appliances or plumbing, for example. By making our homes too airtight, we create new problems.”
As part of the research carried out by Architecture sans Frontières Québec, it was found that some older homes were more resistant to flooding.
“A very watertight house won't let water in, but it can push up and crack the foundation, resulting in structural damage that is much more costly to repair,” explains Levasseur.
Initiatives supported by Ottawa
Through its Climate Change Adaptation Program (CCAP), which has a budget of $39.5 million for the years 2022-2027, Natural Resources Canada has supported several initiatives aimed at making properties more resilient.
In particular, the CCAP funded the development of a climate resilience training course for construction professionals, produced by Engineers and Geoscientists British Columbia.
Another project supported by the program involved the analysis of climate risks by the City of Calgary to establish appropriate adaptation measures. These can then be deployed in other urban and residential areas of Alberta. The results of this analysis will serve as the basis for developing a framework for a climate resilience incentive program in the residential sector.
By the numbers
The year 2024 was by far the most expensive for Canadian property and casualty insurers. Insured losses linked to severe weather events are estimated at $8.5 billion, the Insurance Bureau of Canada (IBC) announced in January. The previous record dates back to 2016, at $6.2 billion.
During the months of July and August 2024, more than a quarter of a million claims were made, for losses totaling more than $7 billion. This is a 50% increase over the number of claims that Canadian insurers generally receive in a full year, IBC points out.
The losses recorded in 2024 are greater than the sum of the losses recorded in 2022 and 2023, which were $3.4 and $3.1 billion respectively, according to Statistics Canada. It also found that the worst years, in terms of insurance claims, include 2020 to 2024, as well as 2016, 2013 and 1998.
Statistics Canada also revealed that for the years 1983 to 2008, average annual catastrophic claims paid by insurers amounted to $400 million and that reinsurance renewal rates rose in 2023, in some cases increasing 25% to 70%, “largely because of the catastrophic weather events in 2022.”
In 2020, a survey by Partners for Action based out of the University of Waterloo, found that that just 6% of households living in a designated flood risk area were aware of this fact.
More than 1.5 million households, or about 10% of all Canadian households, are at high risk of flooding, according to Public Safety Canada.
