The last 10 years have made one thing clear: climate change is no longer a distant threat – it’s a force actively reshaping the insurance industry in Western Canada, introducing new and unpredictable risks for property owners.
In 2024, Canada saw its most expensive year for weather-related losses in Canadian history due primarily to wildfires, floods and hailstorms that totalled $8.5 billion in insured losses. There were more than a quarter of a million insurance claims – 50% more than insurers typically see in a year.
Traditionally, strata/condominium and commercial property owners have focused on financial planning, structural integrity and building maintenance when evaluating and making decisions on insurance plans. However, the increase in catastrophic weather events that include extreme cold, wildfires, flooding and hailstorms means that insurers are reassessing what they consider to be catastrophic risk. This in turn leads to rising premiums and stricter underwriting and coverage limitations.
As a result, property owners must now play a part in learning how to manage their risks.
Canada and Global Warming: Risk Models are Being Altered Due to Climate Change
Insurers in British Columbia have historically said that earthquakes are the primary catastrophic risk for Canadians located in this region. However, in the past decade, Western Canada has seen a marked increase in:
- Wildfires that encroach on and destroy urban areas such as Jasper and West Kelowna.
- Severe hailstorms that cost billions in damages, as seen in Calgary.
- Prolonged extreme cold in the lower mainland of BC leading to burst pipes and water damage.
- Flooding from extreme rainfall and storm surges.
What used to be classified as “once-in-a-lifetime” events are now happening with growing frequency. Insurers must adapt to risks that were once considered improbable, such as wildfires jumping lakes or back-to-back hailstorms. Because of these trends, insurers are redefining their risk models and taking into consideration catastrophic weather events that were previously not of concern.
The impact of adjusting these risk models means that there will be more stringent insurance requirements and higher premiums for properties in high-risk locations.
How Climate Change Impacts Strata/Condominium Insurance and Commercial Property Insurance
Insurers are applying much greater scrutiny to risk assessments than in the past. They are increasingly focusing on factors such as flood zones, building materials and wildfire-prone areas, which often leads to higher deductibles for natural disaster coverage.
Policy conditions are becoming increasingly stringent, requiring clients to demonstrate that they have effective risk-mitigation strategies in place to qualify for coverage. Additionally, insurers may opt to withdraw coverage from properties located in high-risk areas, such as floodplains or fire zones.
How Property Owners Can Adapt Their Risk Management Strategies
Trying to keep up with these new and changing environmental risks can be extremely challenging for property owners. We need to let go of the belief that “this will never happen to me” and instead pre-emptively plan for a catastrophic loss.
By shifting your mindset to accept that climate change has implications on our daily lives, you can identify and plan for insurance risks that include:
Wildfire mitigation
- Using fire-resistant building materials, like metal roofing.
- Creating defensible spaces around your building by clearing vegetation and using fire-resistant landscaping.
- Working with your local municipality on a fire preparedness plan.
Extreme weather resilience
- Installing weather-resistant roofing options.
- Ensuring units are heated properly even if unoccupied.
- Using high-quality building materials that insulate and protect from extreme cold.
- Opting for weather-resistant barriers to prevent water infiltration and moisture issues.
- Ensuring air-tight construction by properly sealing joints, gaps and penetrations.
Flood preparedness
- Assessing floodplain risks prior to purchasing or developing a property.
- Ensuring proper drainage and grading to help prevent water accumulation.
- Installing backflow prevention valves and sump pumps.
- Creating and maintaining an emergency plan.
Partnering with a risk management expert is one of the best ways to identify, address and minimize the risks affecting your properties. Conducting regular risk assessments and implementing recommended improvements leaves your building better prepared. It will also be beneficial for insurance negotiations, since insurers prefer working with proactive and well-prepared property owners.
What Happens When You Do Not Implement Strategies to Adapt to Climate Change
Failure to adapt to climate change can have long-term consequences on your property by making it more expensive to insure with limited coverage. You may also end up losing money since buildings deemed as high risk may see a decrease in property value.
As we adapt to our changing environment, governments may also introduce stricter insurance requirements and building codes to help manage insurance risks.
The industry’s approach to the economic impact of climate change will continue to affect our day-to-day lives and be reflected in our approach to insuring against natural catastrophe risks.
By being proactive on managing your property risks, you are protecting your investment, maintaining insurance coverage and controlling your costs in an evolving insurance landscape.
Danielle Russell, Director of Real Estate at Acera Insurance, specializes in realty and development insurance and risk mitigation solutions.