Home insurers not factoring in climate change: study

VANCOUVER (NEWS 1130) – Home insurance is meant to give our families piece of mind in the case of a disaster.

But a new study from the University of Waterloo suggests providers have more to do to ensure they’ll be able to keep us financially secure.

Insurance providers need to look ahead and factor in climate change, rather than look to the past when planning for the future, says assistant professor Jason Thistlethwaite.

“If they don’t start thinking about climate change, you’re likely to see shortages in the availability and affordability of insurance in many jurisdictions across Canada, particularly those that are highly exposed to climate change, such as Vancouver’s coastlines,” says Thistlethwaite.

Thistlethwaite believes government also has a role to play here by building better infrastructure to protect areas at risk of flooding — or even buy out properties in at-risk areas.

“We need to lower our expectations for what insurers can do, in terms of supporting the management of risk in these areas. Or… we need to ask governments to do a better job in reducing risk in these areas through investments in structural flood risk mitigation — investing in dams, dikes and so on — but more dramatically, and perhaps more appropriately, buying people out of these high risk areas to bring the exposure down to the point that insurance can remain available and affordable.”

Insurance Bureau of Canada vice president of federal affairs Craig Stewart says the report is largely U.S. focused but there are lessons the industry can take from this study.

“The report highlights the fact that we should be pricing risk not just for past historical events, from what we’ve seen before, but for what we expect in the future,” says Stewart. “We agree with that. Reinsurers, as the report states, are at the forefront of such risk modelling, but the models are still fairly uncertain. We don’t have a good handle on what to expect 10, 20, 30 years out in Canada based upon the worsening trends of severe weather.

“As the models improve, we’ll be able to do a better job on pricing risk more accurately.”

Stewart is particularly supportive of relocating people who live in at-risk areas.

“Politically it can be very difficult,” Stewart acknowledges. “Canadians love to live on water, in areas that are prone to flooding. Flooding is the worst climate threat that Canada faces, and so when you tell people that, look, you may not be able to still live where you’ve been used to living 10 years from now, often they don’t take it well.

“But there are lessons learned from the Netherlands, for instance, where they phased in strategic retreat over a couple of decades, made it voluntary, and bought people out over a period of time. And maybe that’s what we need to be looking at in Canada.”