Severe weather causes record insurance payouts

Ice, floods and thunderstorms made 2013 the worst year ever for severe weather insurance losses in Canada.

Ice, floods and thunderstorms made 2013 the worst year ever for severe weather insurance losses in Canada.

The Insurance Bureau of Canada says the December ice storms in southern Ontario and Atlantic Canada caused more than $200 million in insured losses, pushing total severe-weather payouts to policyholders last year to $3.2 billion.

“In 2013, the terrible effects of the new weather extremes hit Canadians hard,” CEO Don Forgeron said Monday in a release.

“From the Alberta floods last summer to the ice storms in Ontario and Atlantic Canada over the holidays, frankly, bad weather hit insurers hard, too.”

The insurance bureau said the largest disaster was flooding that soaked southern Alberta after torrential rains in June. That caused more than $1.74 billion in insured damage.

Record rains and flash floods in Toronto the following month caused an estimated $940 million in damage payouts. The bureau said that flooding was the most expensive insured natural disaster in Ontario’s history.

Severe thunderstorms in parts of Ontario and Quebec in June and July resulted in about $250 million in insurance payouts.

Some insurance companies are raising rates because of the increase in weather-related claims.

Intact Financial Corp. (TSX:IFC), one of Canada’s largest property and casualty insurers, has said it will be raising premiums this year by 15 to 20 per cent.

The company has also introduced peril-based pricing and other changes to its insurance products.

Pete Karageorgos, manager of consumer and industry relations at the Insurance Bureau of Canada in Ontario, said rate increases and deductible changes for policyholders are not a given.

He said much will depend on where people live and which company they insure with.

“Some companies — if they have little exposure in those geographic areas — may not have to do anything differently. Others, they may. They may look at everything from premiums, coverage amounts, endorsements, deductibles,” he said.

“It could be a whole host of responses from quite a bit to nothing at all.”

It will take time for the full financial sting of the disasters to ripple through the industry and to policyholders. Deadlines to file claims vary by province.

In Alberta, policyholders have up to two years to file a business or home insurance claim.

Many of the claims for damage caused by the June rains and floods in the province have been filed by businesses, which will take time to process, said Heather Mack, an insurance bureau spokeswoman in Edmonton.

“The homeowner claims are going quite well,” she said. “The claims that are still outstanding are the commercial claims, which is really the bulk of the $1.74 billion.”

The record payout in 2013 follows four previous years in which severe-weather insurance losses hit or exceeded $1 billion.

In 2006, insured damage from extreme weather was less than $200 million.

Faced with unrelenting losses, the industry is working with governments to come up with ways to counter severe weather, Forgeron said.

One pilot project includes helping municipalities pinpoint weaknesses in sewer and storm-water systems.

“Canadian communities are seeing more severe weather, especially more intense rainfall,” he said. “This overburdens sewer and storm-water infrastructure, resulting in more sewer backups in homes and businesses.”

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