Yahoo Finance Wildfires raising Canadian home insurance costs, experts warn
Wildfires are raising the price of home insurance in Canada, say industry experts, warning that coverage is becoming less affordable in the face of more extreme weather linked to climate change.
Last summer’s wildfires in British Columbia’s Okanagan and Shuswap regions caused over $720 million in insured losses, a record for events in the province, according to industry data. In total, Canada topped $3 billion in insured damage from natural catastrophes and severe weather in 2023, making it the fourth-largest year for losses.
“As risks are increasing, the price of insurance is going to increase,” Lisa Guglietti, executive vice-president and chief operating officer of property and casualty insurance for the Co-operators Group, told Yahoo Finance Canada. “The concern I have is that there are going to be fewer and fewer people that can actually afford insurance.”
Home insurance is not mandatory in Canada. However, most banks and lenders require proof of a policy in order for homebuyers to secure a mortgage.
Guglietti says insurers are becoming more sophisticated at pinpointing areas of risk, allowing companies to adjust local prices accordingly. At the same time, she notes rising costs are being absorbed by policyholders far away from known hot spots like Kamloops, B.C. and Fort McMurray, Alta.
“As we see the number of wildfires increase, from an insurance perspective, that finds its way into everyone’s premium in some way because of the spreading of risk,” Guglietti said. “Insurance is just a pooling mechanism at the end of the day.”
Alana Scotchmer is an insurance specialist and partner at Canadian law firm Gowling WLG. She says wildfire risk is clearly on the rise, along with other climate-linked extreme weather events like flooding.
“If you look at a 25-year plotline, there is an obvious increase,” Scotchmer said in an interview with Yahoo Finance Canada. “It may just get to the point where the losses are too big for the private insurance industry to bear.”
'Inevitable price recalibration'
According to Statistics Canada, “once in 100 years” weather events are happening more frequently, and becoming more severe and costly.
A report in January from Canadian insurance comparison website My Choice Financial found home insurance rates have climbed 7.7 per cent year-over-year.
“High claims costs, soaring repair and replacement expenses, and increased climate-related disasters have set the stage for this inevitable price recalibration,” the report stated.
According to the Insurance Bureau of Canada (IBC), over 1.5 million high-risk households cannot obtain affordable flood insurance.
“If you live in a high-risk flood area, they simply will not sell you flood insurance,” Scotchmer said. “You can’t buy it at any price.”
So far, wildfires have not had a similar impact.
Rob de Pruis, IBC’s national director of consumer and industry relations, says wildfire coverage is readily available across Canada today.
“We’re not getting the sense from any of the insurers domestically in Canada that they’re going to be making radical changes, or pulling out of the market,” he said.
While wildfires have driven an insurance exodus in parts of California, Guglietti says that’s less likely to happen in Canada, as companies are free to set prices without approval from a regulator.
“We are continuing to risk-base price in Canada,” she said. “I would say the broader issue is affordability, and if clients can actually afford to pay the cost of transferring that risk to insurance."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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