Bill Adams, Insurance Bureau of Canada (IBC) vice-president of the Western and Pacific Region, says the rising costs of insurance claims leaves no doubt that climate change is largely responsible:
"It’s happening. The wake-up call is now. There has been a radical shift in the frequency, severity and nature of insurance claims that we’re seeing as an industry in Canada."
According to IBC, insurance payouts from extreme weather have more than doubled every five to 10 years since the 1980s [emphasis mine], and since 2010, claims have hovered between $1 billion and a historic $3 billion, compared with an average of $400 million per year from 1983 to 2008.
Our head-in-the-sand approach is clearly counterproductive:
"I don't think we are adapting to our new weather reality nearly as quickly as we need to," Adams insisted. "I think most Canadians are largely if not (completely) oblivious. Those who are paying attention are those who have either always been engaged and had an understanding of it, or people who have been affected."And besides the existential peril climate change presents, higher insurance premiums are on the way:
While the Fort McMurray fire alone is not enough to raise insurance premiums, he explained, a rash of wildfires across the country certainly could. It could take anywhere from one to three years to establish a trend, and once a trend is established, the costs will likely rise.The Bureau predicts that things are only going to get worse, much worse, over the coming decades, and suggests all homeowners take measures to protect their properties. These measures include installing back-flow valves, using fire-resistant shingles, making sure wall cracks are sealed, etc.
They certainly did after the 2013 floods in southern Alberta, he said, where some insurance companies are reported to have raised their average home insurance premiums by up to 20 per cent.
It is a somewhat sad commentary that only when climate disaster strikes do most people take climate change seriously. Long-term planning and vision, it would seem, have never been our species' strong suits.
The big re-insurers, outfits like Munich Re, have been open in their concerns about climate change forcing their industry out of certain traditional types of coverage. They have mapped out risks as a function of warming to identify points at which specific types of coverage will be withdrawn. As benchmarks are reached you may be notified by your insurer that some coverage will no longer be available.
ReplyDeleteThey're actuaries after all. They want to write as many policies as they can but only so long as premiums exceed payouts. Theirs is a for-profit, risk-sharing industry.
When American insurers shut down flood damage coverage it left the US southeast very vulnerable. Congress stepped in and established a flood insurance programme which wound up being heavily subsidized (socialized). A couple of years back Congress decided the service should be self-financing and directed that premiums be raised accordingly. That sparked an outpouring of protests, from primarily Republican states, that caused Congress to back off and continue subsidizing flood losses.
I recall one case involving a realtor who had come into an old family palace on a barrier island off the Carolinas. She was looking to sell (maybe she read something about sea level rise) until she got word that her flood insurance premiums were going up by $15,000 a year.
Quite abruptly the market fell. If you needed a mortgage to buy her summer house, the mortgagee insisted on full insurance coverage. Taking $15,000 a year out of a purchaser's pocket greatly reduced affordability. Eventually the buyer pool was reduced to those who could pay cash and they demanded discounted prices.
There's a show on the Home & Garden channel, I think it's called "Beachfront Bargains." It shows American families picking up waterfront properties in the south at seemingly impossible prices. Imagine a place on a beach in the Keys for $3-400,000. If it wasn't for climate change, sea level rise and the threat of devastating storm surge, the sellers wouldn't be offering those "bargain" deals. The clever ones, those who can see what's coming, are getting out, taking what they can get, now. They're unloading, hence the "beachfront bargain" properties.
A year or two ago there was a peer-reviewed study that concluded Earth would be entering a new, hot state in which every year would become hotter than the hottest year on record. We're already in that condition in the Arctic but it would spread to tropical and subtropical regions and finally to temperate zones from 2025 through 2045/50. Among the first areas to be affected, the report identified the Caribbean. It's predicted to be devastating to tourism and agriculture, the lifeblood of that region. The Mediterranean is going the same way. The Baltic is being viewed as the new summer getaway destination for Europeans who can't handle the heat of southern France, Spain, Italy, Greece and the islands.
Indeed, Mound, the American experience is being echoed here in terms of trying to pull the government into covering 'uninsurable' losses. In the source article for this post, Bill Adams says regarding floods, “It likely never will be available to those who are at the highest risk of flooding,” he said. “We could insure 90 per cent of Canadian homes from water however it gets in, but that would deal with about zero per cent of the problem we face in our country.”
DeleteThis is where governments can chip in and make sure such options are available to everyone, he explained.
Even though I sit out here a block from the ocean in one of the most temperate places in Canada, I have thought it a good time to prepare for hotter, drier summers. I've let the shade trees in the front and back yards grow taller. I've installed casement, high-E windows and better blinds throughout. This year I'll look at adding some awnings.
ReplyDeleteFortunately we have a very low crime rate and so I can allow my house to cool itself by breathing. Every morning I go about shutting all the windows and lowering the blinds. The house is well insulated and that keeps it comfortable throughout the day. As the sun passes and the cooling evening breezes arrive, it's up with the blinds and the windows all wide open. At that point I turn on the ceiling fans to flush out residual heat and enjoy a delightfully cool evening. But for a few nights each summer I still require a goose down duvet for sleeping.
Mild winters and mild summers - I wonder how long we'll hold onto that climate.
Like you, Mound, we close the drapes and the windows as heat and humidity threaten, and we are blessed with some very good tree coverage. Following such measures allows us to use the air conditioning only very infrequently.
DeleteI should think that, if insurers recognize climate change, that should cinch the argument, Lorne.
ReplyDeleteThe stats are rather compelling, aren't they, Owen?
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