Four natural catastrophic events across Canada in July and August caused more than $7 billion in insured losses, making summer 2024 the costliest season on record.
The Insurance Bureau of Canada recently shared a preliminary breakdown of the catastrophe claims totals from these extreme weather events:
- Jasper wildfire = $880 million
- Toronto and southern Ontario flooding = $940 million
- Quebec flooding = $2.5 billion
- Calgary hailstorm = $2.8 billion
Collectively, these severe weather events resulted in nearly 230,000 insurance claims in a span of two months — more than the total number of natural catastrophic claims insurers have contended with in any year prior to 2024.
The increasing frequency and severity of Canadian catastrophes are causing significant challenges for businesses, including property damage, supply chain disruptions, employee displacement and operational downtime.
Businesses must also find ways to adapt as insurers and reinsurers try to stay resilient in the face of mounting catastrophic weather losses, the costs of which are further ballooned by inflation and increased urbanization.
Understanding catastrophic weather-related insurance changes
While 2024 has seen the Canadian commercial insurance market transitioning to a softer market, businesses in areas prone to catastrophic weather may be less likely to capitalize on the stabilizing and, in some cases, decreasing insurance rates.
If your business is in a high-risk area — such as a location where wildfires, flooding, hailstorms, earthquakes or windstorms are common threats — you should continue to anticipate strict underwriting measures.
Catastrophic weather can result in higher insurance deductibles
Insurers are expecting businesses to have ‘some skin in the game,’ so to speak, by shouldering more of the risk.
This includes higher deductibles, which are doubling in some regions across:
- British Columbia, where threats of earthquakes and wildfires remain high.
- Alberta, where threats of wildfires, flooding and hailstorms persist.
Milder deductible increases are also being felt elsewhere across the country, such as Atlantic Canada where severe windstorms and hurricanes continue to cause damage.
Catastrophic weather could result in insurance coverage restrictions
Insurers are tightening the coverage they’ll offer as Canadians continue to grapple with escalating natural catastrophic events.
As a result, businesses located in high-risk locations might see greater policy restrictions, and even exclusions, for the type of catastrophic weather that presents the biggest direct threat — be it a wildfire, flood, hailstorm or windstorm.
For example, this may include:
- Limited payout conditions.
- Coverage based on strict mitigation measures.
- Limitations around weather conditions (i.e., coverage for windstorm damage may only be available up to a certain wind speed).
- Damage exclusions for any property deemed highly vulnerable (i.e., buildings with older roofs or those not built to withstand severe hail).
- Limited business interruption coverage for operational downtime following a natural catastrophe.
Catastrophic weather causes binding authority restrictions
Binding authority restrictions are becoming more common in the wake of increasing natural catastrophe losses.
Insurers typical issue a binding authority restriction for a defined geographic area when there is an imminent threat of damage. For example, several binding authority restrictions were issued across British Columbia and Alberta during wildfire season this past summer.
When a binding authority restriction is issued, businesses within the specified location will be unable to purchase new coverage, change existing coverage and even renew their current policies.
3 tips to protect your business from catastrophic weather
Natural catastrophes can pose significant risks, but you can protect your business with the right planning and preparation.
Protect your business from catastrophic weather
Natural catastrophes can quickly cause devastating property damage and operational downtime.
We recommend that your business invest adequate time and resources to proactively minimize the threats that catastrophic weather presents.
Each of our severe weather guides offer insights into how your business can minimize the extent of property damage and business interruption that a natural catastrophe may cause. Learn how to protect and prepare your business for:
In addition to helping to safeguard the longevity of your business, insurers may also reward proven risk mitigation efforts with better terms and pricing.
Choose an insurance broker that specializes in risk management
Businesses operating in areas prone to natural catastrophes can greatly benefit by working with Acera Insurance.
We have the knowledge, expertise and market reach to help secure adequate coverage for your distinct business needs. We will also help your business navigate complex policies and exclusions that are becoming more common as natural catastrophic events escalate.
Furthermore, we will serve as your partner in risk management. Our suite of risk management services can help your business identify and assess severe weather risks, as well as strategize how to prevent and mitigate the financial devastation a natural disaster could cause.
The need to prioritize effective risk management strategies in the face of catastrophic weather cannot be understated. Some insurers will reward such practices with better terms or rates while, in other cases, your coverage might be entirely dependent on adhering to strict risk mitigation measures.
By leveraging both insurance and risk management expertise, your business will be better protected and prepared for natural disasters.
Rethink renewal timelines to avoid catastrophic weather seasons
With binding authority restrictions becoming more common in certain regions during specific times of the year — such as in British Columbia and Alberta in July and August, which is peak wildfire season — your business should work with your broker to assess policy renewal times.
Having renewals dates that fall outside of common severe weather seasons can help to ensure your business has the coverage it needs year-round — including when you need it most if threatened by catastrophic weather.
It’s also important to take severe weather seasons into consideration when determining project completion timelines. This is because, for example, transferring a construction policy over to an operational policy will not be possible if there is a binding authority restriction in place, potentially leaving a project uninsured for a period of time.
Your broker can help you determine an optimal renewal timeline for your commercial insurance by factoring in your industry, location and scope of work.
Acera Insurance will help you weather any storm
You can’t prevent a wildfire, flood, hurricane or earthquake. But Acera Insurance will work closely with your business to ensure you’re well prepared for catastrophic weather.
We’re in the business of protecting yours. Contact one of our expert brokers today to discuss your needs.