Insurance and the environment

Mother Nature ups the ante

It’s unlikely that you would have put climate change at the top of your risk list ten years ago. But with recent natural disasters fresh in our minds, there’s no denying that climate trends of the past decade are a force to be reckoned with. Insurance claims have surged as more and more flash floods, rising rivers, hailstorms, and windstorms pummel the landscape.

Climate change is one of the most significant long-term risks to all industries, but the insurance sector is directly on the front line. In the nine years from 2000 to 2008, insured losses in Canada caused by large natural catastrophes exceeded $1 billion only once; in the nine years from 2009 to 2017, they exceeded $1 billion every year except once.

No risk stands alone

Risks are often intertwined with the consequences when one risk has a direct impact on others. Consider, for example, water damage and its impact on infrastructure like transportation, buildings, communications, water distribution/supply and storm sewers.

Climate change forces Canada's aging infrastructure to withstand more frequent and severe flooding. An aging infrastructure unable to keep up with the volume of water caused by storms contributes to the increase in water damage claims. Where sewer and surface water infrastructure hasn’t been well maintained, even a modest rain results in sewer backup.

Climate change is also set to impact both the life and health insurance industries through its direct and indirect effects on human health. Colder winters and hotter summers especially put the older population at risk. Diseases, injuries and deaths are also set to increase due to increasingly frequent natural disasters.

Education and support are key

While the insurance industry may not be able to prevent Mother Nature’s potential threats, we are in a good position to educate and support clients in managing and adapting to climate risks.

Insurers’ risk management skills will be crucial in helping society cope with the increasing frequency and severity of extreme events. Emerging climate risks also offer insurers an opportunity to teach policyholders about loss control and prevention.

A trusted voice on risk issues, the insurance industry is able to speak with authority to policymakers.  Insurers also have an opportunity to develop creative products and services to minimize the causes and effects of climate change. Our sustainability vision includes a focus on advocating for climate change adaptation and mitigation, and working with our clients to deal with emerging risks.

Canada's insurers participate in the Institute for Catastrophic Loss Reduction (ICLR), a forum for insurers to work more actively with the research community and others to better understand severe weather and options for managing this risk.

Consumers will increasingly be looking to insurers to provide products and services that improve disaster resilience and are proactive about addressing the climate change threat. Consumers are eager to see insurers do more to provide products and services that respond to improving disaster resilience, and being proactive about the climate change threat. And The Co-operators has taken up the challenge. Please see Extreme Weather and the Insurance Industry for more details on our response to extreme weather.