Reeling from devastating natural disasters in Calgary and Toronto, the IBC predicts Canadians will be paying higher home insurance rates in 2014. Early estimates indicate the total cost of damages for insurers in the two cities will exceed $2.5 billion.
Residents in Calgary and other Southern Alberta communities are still recovering from the torrential downpours that flooded the region three weeks ago. The insurance industry expects the cost of the damages to equal or exceed the 1998 ice storm in Southern Quebec, which was Canada’s most expensive natural disaster, costing $1.8 billion.
Preliminary estimates suggest the cost to recover from the Toronto floods earlier this week will exceed $600 million. The storm was declared a “catastrophe” by Property Claim Services Canada, meaning the organization expects insurance claims will cost a minimum $25 million for the industry.
Insurance companies are often financially prepared to endure unexpected events over the long term, but excessive, successive events can affect quarterly earnings for these insurers.
The current cost for home insurance in Toronto averages around $800 a year, while the average cost in Calgary averages around $955 a year.
William Burn, assistant vice-president for Moody’s Banking Services, warns homeowners to expect higher insurance rates in the months and years ahead.
“It’s likely to mean higher premiums for policy holders going into the next year and also potentially some forms of coverage might be carved out and have a higher deductible.”
Over the last decade, severe weather patterns caused unprecedented damage and destruction across Canada. Water is now the leading cause of property damage in Canada, and pressure is on insurers to update standard home insurance policies to reflect this reality.
Canadians have the option to include coverage for sewer backups into their insurance plans, but overland flooding is not available anywhere in Canada. The IBC fielded many calls in the last three weeks about overland flooding coverage, and more Canadians are demanding the option be included as part of their home insurance plans.