Insurance Bureau of Canada Warns of Growing Risks as Climate-Related Losses Surge
The Insurance Bureau of Canada (IBC) has sounded the alarm on the escalating risks and financial toll of climate-related disasters, which are intensifying in both frequency and severity. According to data from Catastrophe Indices and Quantification Inc. (CatIQ), 2024 marked the second-costliest year on record for insured commercial property losses in Canada, with damages exceeding $1.7 billion. This stark reality underscores the growing climate risks reshaping the insurance market and posing significant challenges for businesses, individuals, and insurers alike.
Escalating Costs Due to Severe Weather
2024 was defined by unprecedented financial losses from severe weather events, with a total of $8.55 billion in insured damages across Canada. Catastrophic events in July and August alone accounted for $7 billion in losses, including record-breaking damages from wildfires, flooding, and hailstorms. The Jasper wildfire was among the most significant events, contributing $1.1 billion to the total, while Calgary’s August hailstorm caused $3 billion in damages in just over an hour.
These weather events disrupted lives, businesses, supply chains, and transportation networks in various regions, amplifying their economic impact. Since 2010, extreme weather has caused over 132,000 businesses in Canada to file insurance claims, with the intensity of losses doubling in the past five years compared to the preceding five-year period. In total, commercial and personal property losses have risen from $10 billion to $20 billion over this time frame.
Insurance Sector Adjustments and Rising Premiums
To cope with the surging risks, Canadian insurers are adjusting their operations by raising premiums and implementing stricter underwriting practices. This adjustment, however, has led to higher costs for policyholders and poses challenges for affordability and availability of coverage. Alberta, for instance, experienced the steepest premium hikes in 2025, with rates climbing over 9% following significant losses from events like the Calgary hailstorm and Jasper wildfire.
Furthermore, the increasing unpredictability and magnitude of climate-related disasters have pushed insurers to reconsider their presence in high-risk regions. Insurers are increasingly limiting coverage options or withdrawing from areas susceptible to wildfires, floods, or other extreme weather events, resulting in “insurance deserts.” This trend has raised concerns about the long-term viability of coverage for communities in vulnerable regions.
Calls for Proactive Measures
Recognizing the escalating risks, the IBC has emphasized the urgent need for proactive government action to strengthen Canada’s adaptability to climate-related events. Policy recommendations include:
- Investment in resilient infrastructure: Building flood defenses and improving community infrastructure to withstand extreme weather.
- Land-use planning and zoning regulations: Ensuring that homes and businesses are not constructed in flood-prone areas.
- Implementation of FireSmart practices: Promoting preventative measures in wildfire-prone communities.
- Updated building codes: Enhancing construction standards for better protection against severe weather.
Liam McGuinty, Vice President of Strategy at IBC, highlighted that beyond physical damages, weather-related calamities disrupt business operations, supply chains, and the economy at large. He called for combined efforts from the government, insurers, and communities to mitigate risks and enhance overall resilience.
A Changing Insurance Landscape
The financial and operational impacts of climate change are transforming the insurance industry in Canada and beyond. Insurers are developing innovative catastrophe modeling and sustainability-focused initiatives, such as climate resilience programs. However, the rising costs of claims and the challenges of managing high-risk exposures underline the growing difficulty of balancing affordability and comprehensive coverage.
With Canada becoming an increasingly risky environment for living, working, and insuring, stakeholders are heeding the warnings of climate scientists, industry leaders, and policymakers. As weather-related losses continue to rise, the intersection of climate change and insurance highlights the need for urgent action to adapt to this new reality and ensure long-term sustainability in the face of escalating climate risks.
Regional Impact Analysis and Future Projections
The escalating climate-related risks are not uniformly distributed across Canada, with certain regions bearing the brunt of extreme weather events. Alberta, for instance, experienced the most significant financial impact due to the Calgary hailstorm and the Jasper wildfire, leading to a 9% increase in insurance premiums in 2025. This regional disparity highlights the need for localized strategies to mitigate risks and adapt to the changing climate.
Looking ahead, projections indicate that climate-related losses are expected to rise further. Insurers are leveraging advanced catastrophe modeling to better assess risks and develop more accurate pricing strategies. However, these advancements also reveal a grim outlook, with certain areas potentially becoming uninsurable due to the high probability of catastrophic events.
Case Studies: The Human and Business Impact
Beyond the financial figures, the human and business impact of these events is profound. The Jasper wildfire not only caused $1.1 billion in damages but also displaced numerous families and disrupted local economies. Similarly, the Calgary hailstorm, which caused $3 billion in damages, highlighted the vulnerability of urban centers to sudden, extreme weather events.
These case studies underscore the importance of proactive measures, such as implementing FireSmart practices and updating building codes, to reduce the risk of future disasters. By learning from past events, communities can better prepare for the challenges posed by climate change.
Long-Term Sustainability and Adaptation
As Canada’s climate continues to evolve, the insurance industry is at the forefront of adapting to these changes. Insurers are increasingly focusing on sustainability initiatives and climate resilience programs to help communities rebuild and recover more effectively. However, the challenge of balancing affordability with comprehensive coverage remains a critical issue.
The collaboration between government, insurers, and communities is essential for creating a resilient future. By investing in resilient infrastructure and promoting preventative measures, Canada can reduce the financial and human toll of climate-related disasters and ensure long-term sustainability in the face of escalating climate risks.
Conclusion
The escalating climate-related losses in Canada underscore a stark reality: the country is facing unprecedented risks that demand immediate attention and action. The surge in severe weather events, from wildfires to hailstorms, has led to record-breaking financial losses, disrupting lives, businesses, and entire communities. As the insurance industry grapples with rising costs and the challenge of balancing affordability with comprehensive coverage, the need for proactive measures has never been more urgent.
Regional disparities in climate impacts, such as the significant losses experienced in Alberta, highlight the importance of localized strategies to mitigate risks. Collaboration between governments, insurers, and communities is essential to build resilience and ensure long-term sustainability. By investing in resilient infrastructure, updating building codes, and promoting preventative practices, Canada can reduce the financial and human toll of climate-related disasters.
The intersection of climate change and insurance serves as a stark reminder of the need for urgent action. As weather-related losses continue to rise, stakeholders must work together to adapt to this new reality and create a more resilient future for all Canadians.
FAQ
- Why are climate-related losses increasing in Canada?
- Climate-related losses are increasing due to rising global temperatures, leading to more frequent and severe weather events such as wildfires, floods, and hailstorms. These events are causing unprecedented damage to properties and infrastructure across Canada.
- What is the financial impact of climate-related disasters in Canada?
- In 2024, Canada experienced $8.55 billion in insured damages from severe weather events, with catastrophic events in July and August accounting for $7 billion in losses. This marks a significant increase in climate-related financial impacts over recent years.
- Why are insurance premiums rising in Canada?
- Insurance premiums are rising due to the increasing frequency and severity of climate-related events, which have led to higher claims costs. Insurers are also implementing stricter underwriting practices and raising premiums to manage these growing risks.
- Will insurance become unaffordable or unavailable in high-risk areas?
- There is a growing concern that certain regions, particularly those prone to wildfires, floods, or other extreme weather events, may become “insurance deserts.” Insurers are limiting coverage or withdrawing from high-risk areas, which could lead to unaffordable or unavailable insurance options for some communities.
- What proactive measures can be taken to mitigate climate risks?
- Proactive measures include investing in resilient infrastructure, implementing FireSmart practices in wildfire-prone areas, updating building codes, and improving land-use planning and zoning regulations. These steps can help reduce the risk of future disasters and protect communities.
- What role should governments play in addressing climate-related risks?
- Governments should play a critical role by investing in resilient infrastructure, updating building codes, and implementing land-use planning and zoning regulations. They should also work closely with insurers and communities to promote preventative measures and enhance overall resilience to climate-related events.
