Is storm-ravaged Alberta insurable?

Alberta has experienced a disproportionate share of the extreme weather catastrophes in Canada over the past decade, causing insurers to question whether the province is a viable place to do business.

Residents walk through flood waters in Calgary on June 24, 2013. Storms, hurricanes and floods driven in part by climate change will cost the federal disaster fund $902 million a year over the next five years, well above past averages, the parliamentary budget officer predicted Thursday.THE CANADIAN PRESS/Nathan Denette

The question was raised Friday at the C4 conference in Ottawa, where a conference panel discussed why the province’s average home insurance premium soared from $500 to $1,500 over the past decade.

Panelists observed that severe weather events arising from climate change, in addition to a major population boom in the province, have resulted in the Canadian property and casualty insurance industry paying out major losses occurring in the province.

Of the approximately $9 billion that the P&C industry paid out in catastrophe claims over the past nine years, 63% of those losses have happened in Alberta.

“Is Alberta viable as a place to do business of insurance?” Joel Baker, president and CEO of MSA Research, asked the panel. “Are the rates adequate? Is it possible to get the rates adequate? Is it sustainable?”

“It has to be,” replied panelist Keith Hartry, senior vice president and chief operating officer of Wawanesa Mutual Insurance Company. “People need insurance, so we have to find a way of making it viable.”

Hartry said to make the home insurance product viable, “it’s likely going to mean people will have to accept more exposure themselves than they are used to.” That could take the form of homeowners accepting higher policy deductibles, or risk mitigation measures.

Also, panelists said, governments may need to accept more exposure than they have in the past, likely in the form of more taxpayer funds for disaster assistance programs.

Baker’s question should not be underestimated, said Joseph El-Sayegh, president and CEO of SCOR Canada Reinsurance. “The basics of insurance is that the premium of the many pay for the losses of the few,” he said. “So, for the time being, it’s a fact that the premium of all Canadians is paying for the losses of Albertans.”

Demographic shifts are playing a major role in the increase of exposure, Hartry said. Alberta’s population has almost doubled over the past decade, and Calgary’s population has more than doubled. Red Deer’s population has doubled, and, in Aidrie, Alberta, where a hailstorm in 2014 caused one of the Top 9 cat events in Canada, the population has increased over the past decade from 5,897 to 64,000.

“These [cities] are in the exact area where most of the storm activity is,” Hartry said. “It’s a combination of changing weather patterns, and more people in harm’s way.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.