The Canadian Press

Andy Blatchford

Harsh weather whipped up by climate change has caused insurance claims to surge as more and more flash floods, hail storms and hurricanes wallop the Canadian landscape, industry experts say.

And — thanks to global warming — there’s more of that to come, a conference in Montreal was told Monday.

Martin-Eric Tremblay of the Co-operators Group Ltd. said that insurance companies now expect to pay out claims on catastrophic events four times more often than they did in the 1980s.

Weighing the risks of natural disasters has become part of daily operations for insurance firms, he said.

“Years ago we were not even thinking about having hurricanes on the shores of the Atlantic (provinces),” Tremblay, Co-operators’ senior vice-president, said in an interview after his presentation to a workshop organized by Quebec’s financial regulator.

In its 2009 report, the Insurance Bureau of Canada said insurance claims related to severe weather, even when adjusted for inflation, have doubled every five to 10 years since the 1950s.

The weather patterns could wind up hitting customers’ wallets.

“We’ll have to take (more natural disasters) as a Canadian reality,” Tremblay said.

“If you’ve got one every three years, it’s a small surcharge in your premium, but when it comes to three or four big events a year, you’ve got to charge it back to the client.”

Asked whether this could be an excuse for insurance companies to hike premiums, a spokesman for the Consumers’ Association of Canada said it hasn’t examined the issue and could not comment.

But one industry member said governments can keep insurance premiums down by creating building codes that call for sturdier structures and by putting more limits on where new homes are built.

“If you have more bad storms come and there’s not a change in behaviour there will be more damage — and the insurance companies need to cover their costs,” said Paul Kovacs, founder of the Institute for Catastrophic Loss Reduction.

The independent, disaster-prevention research institute was created by the Canadian insurance industry and has designed building specs that builders can use to fortify homes.

Property loss due to major weather events such as powerful winds, severe winter storms and wildfires has become a bigger concern for Canadian insurance companies, he said.

But water damage, usually in the form of basement flooding, has been by far the most costly, Kovacs added.

He said a perfect storm of increasingly frequent downpours, crumbling water infrastructure and fancier basements has spiked the price of claims.

“Unquestionably, the weather has changed and more is coming,” he said.

Tremblay indicated that insurance companies are already covering water damage without receiving enough in return.

He said today’s premiums are likely underpriced by 15% to 25%.

Insurance companies have been gradually increasing rates across the country, but there’s a limit to what clients can take on, he added.

The difference will have to be charged one day or another unless governments take action to ensure that Canadians sees better building practices.

“We are lagging behind what we should be charging,” he said.

“We see new houses being built on cliffs and one day or another … some of those cliffs won’t be there anymore.”