Our 2024 severe weather impacts in Canada will set records. While the Insurance Bureau of Canada has not released its final numbers for 2024, there is little doubt that with over $7 billion in impacts just in the summer months, people will need to look at new ways to approach issues. Let’s look at some options.
Option 1 – Premiums
When these situations arise, the first reaction is to raise premiums to cover the costs. Unfortunately, this measure offers little relief and may put the insurance industry under scrutiny. People have seen premiums increase and the current price of living issues will see additional people forego additional insurance costs as they attempt to cover essentials.
Additionally, increased premiums (and restructuring measures can be included in this category) only transfer the impacts of severe weather from the insurance industry back to governments and the people themselves. In brief, it makes the issue somebody else’s problem but does little to fix anything.
Option 2 – Rethinking Replacement
Those who have had to file claims for damages have been advised that things are done on a replacement cost level. While this may remain true for appliances and other assets, we may want to rethink this when looking at property (including structural) repairs. Why?
Simply put, severe weather is not just a “one-off” event. 2025 will have a hurricane season, as will 2026, and so on. These severe weather events are also intensifying. That means that the probability of having the same level or more intense storm next year as this year is not going down, it may actually be increasing. Consequently, a replacement only strategy will simply mean a cycle of higher-cost claims.
Consider roof repairs, something not uncommon in severe storms. A straight roof replacement (considering asphalt shingles, a basic felt underlayment, and solid decking) will be slightly more than a 1:1 ratio because of increased costs, inflation, etc.
From a risk management perspective, the homeowner risk does not decrease with the simple replacement. We just prevent secondary losses (leaking, etc.) until the next event. That next event could be as early as the next year.
However, if we consider the storms that may occur in five years, our immediate cost may be higher, but it offers a reduced risk of higher costs for the next three or four years. This is because the design of the roof and its construction will be more robust when compared to the events it needs to withstand.
| Year | Simple Replacement | Improved | Notes |
| 0 | $15,000 to replace as is ($15K total) | $30,000 to replace but with additions to address the trend | Year of impact and the decision on how to replace |
| 1 | $15,000 (replace as is) ($30K total) | $5,000 (minor repairs) ($35K total) | The improved cost is arbitrarily assigned so that we aren’t just adopting the “best case scenario.” |
| 2 | $15,000 (replace as is) ($45K total) | $7,500 (minor repairs) ($42.5K total) | The improved cost is increased to reflect the narrowing of the gap between design and event. |
| 3 | $15,000 (replace as is) ($60K total) | $10K (moderate repairs) ($52.5K total) | At this point, we are at the halfway point in terms of the increased impact. |
| 4 | $15,000 (replace as is) ($75K total) | $12.5K (more significant repairs) ($65K total) | Assuming just moderate to more significant repairs. Gap between design and event nearly closed. |
| 5 | $15,000 (replace as is) ($90K total) | $30K (next five year cycle) ($95K total) | Noting that while the improved cost is higher overall ($95K vs $90K), there is nearly a $35 contingency |
This table is intended to start a discussion, not present a “perfect view.” It’s somewhat oversimplified and those who underwrite insurance policies will likely want to include several other factors. That being said, it is illustrative.
Option 3 – Fixing the Baselines
The second element involves the fixing of baselines (often in terms of building codes). We must be clear–the building code represents a minimum construction standard.If we are going to continue the habit of “building to code,” we will need to amend the code.
The following adjustments may help in this respect:
- Routes in and out – for communities: Ensuring there are at least three routes in and out. This would allow a primary and secondary egress route (a lesson learned from the fires in Halifax) but may also offer a route that can be used for emergency services.
- Climate Risk Zoning: For each property, identify the major severe weather risks (we can add flooding and wildfires here) so that any construction needs to take into account the impacts associated with such events.
- Infrastructure tied to risks: This includes services such as roads, hydrants, and similar kinds of infrastructure to be designed into the build.
- House infrastructure to build resilience: This would include ensuring that appropriate space is left (see the Firesmart programs), electrical hookups for backup power (to prevent improvised methods that often become fire hazards), and so on. This could also include an aspect of the building code that allows for an automatic transfer switch to kick in should power fail and allow for battery-backup or something similar.
Option 4 – Building Capacity
The fourth option involves building capacity.A simple week-long module in any high school program that goes through the basic skills necessary in an emergency may well reduce the impacts on individual households. Understanding the basics of things like generator maintenance, vehicle maintenance, how to shutter windows for high winds, and so forth takes some of the stress out of figuring out what to do.
A separate option (or a different option) would be to promote courses for property owners and managers through the Emergency Management Offices so that these groups have a better understanding.