2024 insured NatCat losses could top out at $9 billion

Canada’s property and casualty insurance industry is on track to pay out close to $9 billion in natural catastrophe (NatCat) losses by the end of 2024.

Thus far, the official tally is $7.7 billion, but that number is continuing to rise, Institute for Catastrophic Loss Reduction (ICLR) executive director Paul Kovacs said Thursday on Canadian Underwriter’s virtual webinar, ‘Canada in a de-globalized world.’

“The new number for this year is $8.3 billion, and those of us who watched the [provincial] election in British Columbia a few weeks ago and saw those cars floating down the street as people couldn’t vote, we still haven’t added that one in,” he said. “So, it’s quite possible, when we finally get to December and add everything up, that we will be at $9 billion this year.”

Heavy rainfall from an atmospheric river caused power outages and widespread flooding throughout B.C. on Oct. 19-20. At the time, Environment Canada forecast 90 mm to 150 mm of rain to fall in Metro Vancouver, parts of the Fraser Valley, and the Sea-to-Sky corridor, while rain on the North Shore was projected to exceed 180 mm. Catastrophe Indices and Quantification (CatIQ) is still compiling official claims tallies from that storm.

While this is a record year for NatCat damage in Canada (shattering the old record of $5.9 billion, driven by the Fort McMurray, Alta., wildfire, and adjusted for inflation), it’s part of a larger trend of increasing frequency and severity of storms worldwide, said webinar panellist James Finucane, senior economist at Swiss Re.

“I sit in the U.S., and it’s been sort of sort of a similar picture,” said Finucane, who is based in New York. It’s “not just climate change,  and greater rainfall and stronger storms, but increased urbanization, economic development, [and more] people living in the path of these storms [also contribute to] driving the losses up, and it’s true at the global level as well.

“I think this will be the fourth, if not the fifth, year in a row with over $100 billion of NatCat losses globally. So there is, I think, a realization that we’re at sort of a new level of losses to expect each year, even though some years, of course, will still see spikes.”

Also in the news: How high volumes are shifting adjusters’ approach to some claims

Kovacs sees what happened in Canada this year as one of those “spikes.”

“Personally, I do not think next year will be $8 billion or $9 billion,” Kovacs said. “That was a spike that happened this year. We had losses in our largest city Toronto, our second largest city Montreal, and our third largest city Vancouver. All the big cities got hit, including Calgary, at the same time. So I don’t think we’re going to have this year’s number again next year.

“But we’re on a trend where it’s rising. I think the number next year is probably going to go back closer to the $3 billion or $4 billion range. But [increasing storm damage] is a 40-year-trend.”

Matthew Campbell, vice president of finance, claims and strategy at Sovereign Insurance, said much of the NatCat damage this year tended to affect the personal lines segment — home and auto insurance — more than commercial lines.

But as the storms get more frequent and intense, the damage will start to affect the commercial side more, which makes it imperative for commercial brokers to encourage business clients to take steps to prevent damage caused by future storms, he said.

Moving forward, companies will be adjusting rates to account for the anticipated rise in weather-related damage losses, Campbell added.

[More frequent NatCat losses] have a huge impact on the industry, and as these numbers increase, it needs to be built into pricing,” Campbell said. “We need to make sure that pricing is adequate for this…”

“We’re doing lots of financial modelling, but as I mentioned about inflation and interest rates, history isn’t necessarily showing us what’s going to happen [with NatCats] in the future. So we need to build something [into the pricing models] and some years will be worse than others, for sure.”

Photo Credit: Multiple homes are seen surrounded by debris left by flooding from torrential rain from an atmospheric river weather system at Deep Cove in North Vancouver, on Tuesday, Oct. 22, 2024. Heavy rain isn’t unusual for the community of Deep Cove, in North Vancouver, but when Ashifa Saferali saw an e-bike floating down the middle of the street she knew this storm was something different. THE CANADIAN PRESS/Ethan Cairns