Canada isn’t ready for an earthquake: IBC

Although earthquake insurance is widely available in Canada, take-up is still low, meaning a vast majority of Canadians are not prepared for an earthquake, Insurance Bureau of Canada says.

Between 4% to 7% of Quebec personal property residents have the coverage, and 50% to 65% in British Columbia, the latest IBC figures show. 

In Canada, the Ottawa-Montreal-Quebec City corridor and B.C. have the highest risk of experiencing an earthquake, yet their coverage uptake doesn’t reflect that. Specifically, B.C. has a 30% chance of being hit with a significant earthquake in the next 50 years, according to Natural Resources Canada. 

“This low uptake may be due to a misconception that earthquake coverage is part of standard home insurance contracts,” Liam McGuinty, IBC’s vice-president of federal affairs writes in a recent blog post. “Others may not believe they need it, be deterred by the costs, or assume the government would provide financial support in the event of an earthquake disaster.” 

But if a significant earthquake of a 9.0-magnitude occurred, it could result in approximately $128 billion in total economic losses, according to an IBC-commissioned study by The Conference Board of Canada.   

“To put that in perspective, a magnitude of 7.0 can cause buildings without earthquake-proof construction to collapse, rupture roads, damage pipelines and railways. If it happens offshore, it can cause tsunamis and damaging aftershocks,” McGuinty writes.  

“The low uptake of earthquake coverage adds another pressure to the insurance industry,” he continues. “Under ordinary disaster conditions, the industry is more than prepared to support its policyholders. However, an earthquake of catastrophic proportions could overwhelm even the most prepared insurers.” 

Because of low earthquake insurance uptake in Canada, insurers don’t have enough premium dollars to cover the risk. That means they’d have to rely on reinsurance to cover losses, but that adds pressure to the global insurance market.  

Federal backstop  

Canada’s P&C insurers have advocated for a public-private earthquake insurance backstop for years and are hopeful it may soon come true. 

In the federal budget released Nov. 4, the government committed to consulting with “federally regulated property and casualty insurers and other interested stakeholders on ways to ensure the stability of Canada’s insurance sector in an extreme earthquake event. 

“More can…be done to ensure Canadian consumers are protected by a resilient financial system in the face of extreme events like earthquakes,” the 2025 federal budget says. 

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“In all G7 countries with high earthquake risk, except Canada, the national government sets up a tailored insurance plan with a safety net or “backstop,” says McGuinty. “Canada’s federal and provincial governments should have similar plans and partnerships like those of other countries around the world.   

“New Zealand (2010) and Japan (2011) have demonstrated that a pre-planned recovery system is crucial for rebuilding homes, businesses, communities and the economy after a major earthquake. California manages its seismic risk through a public-private partnership called the California Earthquake Authority (CEA),” he writes.  

“This non-profit entity provides financial backing for earthquake insurance that is sold through private P&C insurers. These frameworks show that such solutions can work effectively, distributing costs and ensuring a quicker, more equitable recovery.” 

Alyssa DiSabatino

Alyssa Di Sabatino has been a reporter for Canadian Underwriter since 2021, covering industry trends, market developments, and emerging risks.