Recent reports show that climate change is not only increasing the frequency and intensity of extreme weather events but also driving up insurance rates across Canada due to reinsurance premiums surging.
Rising Reinsurance Premiums Challenge Insurance Industry in Canada
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According to the latest inflation report from Statistics Canada, home insurance costs have soared by 8.2 percent nationally in June compared to the previous year. While inflation does account for some part of these increases, the climate and federal affairs vice president for the Insurance Bureau of Canada, Craig Stewart, highlighted that a significant portion is attributed to the rise in reinsurance premiums. Reinsurance premiums are the amounts paid by insurance companies to reinsurance companies to obtain coverage against potential risks. As climate-related disasters become more frequent and severe, insurance companies seek reinsurance premiums as a protective measure to prevent potential bankruptcy in the face of mounting claims. Stewart pointed out that reinsurance premiums have surged between 25 and 100 percent over the past year. Although not all of these costs are directly passed on to consumers, policyholders are feeling the impact, with many facing higher premiums. The situation is even more alarming for the tourism and hospitality industry in western Canada, where some businesses are struggling to renew their insurance policies due to the steep increases.
Reinsurance Premiums Reach Unprecedented Highs
scalating Climate Risks Drive Sharp Surge in Reinsurance Premiums (PHOTO: Matt Palmer)
The reevaluation of Canada’s risk profile by global reinsurance premiums and their respective companies is directly linked to the rising costs. Recent data reveals that Canada is among the countries most affected by climate change in terms of insurance risks. With the current trajectory, some experts warn that Canada might eventually face a situation where certain areas become uninsurable. Although such a scenario is not immediate, it remains a possibility. Stewart stated, “The amplification of these events over the last five years just happened quicker than anyone could have imagined, so unfortunately we may be having that conversation sooner rather than later.” The situation in Canada mirrors a broader insurance crisis fueled by the climate crisis in the United States. Insurers are increasingly reluctant to offer coverage in high-risk areas, such as Florida, vulnerable to hurricanes and other climate-related disasters. As climate change continues to wreak havoc, Canadians are left with little choice but to brace for higher insurance premiums and potential challenges in obtaining coverage. As the impacts of climate change become more evident, governments, insurance companies, and individuals will need to work together to find sustainable solutions to mitigate the financial burdens caused by these surging reinsurance premiums.
