Seeing the images of devasting wildfires in Los Angeles elicits still-fresh memories of the B.C. wildfire disasters in 2023.
That summer in the Okanagan and Shuswap, wildfires burned 2.84 million acres, forced tens of thousands of people to evacuate, and destroyed hundreds of homes and other structures.
It is triggering for many in the Shuswap.
That year, the BC wildfire season resulted in over $720 million in insured losses, putting it at the top of all other 2023 extreme events and in the top 10 ever recorded in Canada.
Now, the California wildfires once again highlight the increasing risks not just for people, but also for insurance companies covering losses associated with climate-fueled catastrophes.
Whether it’s flooding, hurricanes, tornadoes or wildfire, the insurance industry in the U.S. has been running catastrophe models which are now being informed by climate-change data. These companies do not subscribe to conspiracy theories and have no hidden agenda. They are simply using scientific facts to help them make decisions so that their businesses remain viable. The models they are using predict increasing liability, particularly in areas prone to extreme weather events. The higher costs of building and home repairs are also intensifying those losses.
Unsurprisingly, the growing risk borne by insurers is now impacting those purchasing insurance. S&P Global reports that the average home insurance premiums rose a stunning 43 per cent in Florida, and similarly in California, between January 2018 and December 2023. Those increases were much higher than the rate of inflation over the same period. In response to these increasing liabilities, some large insurance companies in several US states have reduced or completely ended coverage in those regions seeing more frequent, widespread and intense natural disasters associated with climate change.
The California Department of Insurance states that between 2020 and 2022, insurance companies declined to renew 2.8 million home policies in California, including 531,000 in LA County. In Canada the situation is similar, with a rapidly warming climate impacting property insurance in this country. A Canadian insurance technology company recently conducted an analysis of insurable losses over the last 40 years using Statistics Canada data. They compared the 10-year average of annual disaster-related insurable losses against the prior 30-year average, adjusted for inflation. They found the annual average insurable losses in Canada over the last decade increased by a whopping 379 per cent, when compared to the prior 30-year average.
Data from the Insurance Bureau of Canada supports that assessment, reporting that in 2024, Canada suffered insured losses in excess of $7 billion – a 406 per cent rise from the 20-year average.
With premiums trending upward locally, the industry has been shifting liabilities onto policy holders by upping premiums and deductibles, limiting coverage and/or requiring certain proactive measures to mitigate various types of damages.
Populations here and around the world are worried about inflation, yet we appear to be sleep-walking into the greatest inflationary mechanism we have ever faced – climate change.
Insurance costs are very likely the “canary in the coal mine," providing us insight into how costs are going to increase not just for insurance, but for every single item impacted by climate chaos.
We are in a new era of climate extremes that has a myriad of dire consequences for citizens, and the sooner we address the root problem – the factors fueling the climate crisis – the better.
Meanwhile, as the planet continues to warm, heed the advice from emergency and fire experts in Los Angeles – “prepare for the unprecedented."
Julia Beatty,
Chair of the Shuswap Climate Action Society