Canada has been much less affected by major catastrophes than other regions worldwide over the past 25 years, but risks here shouldn’t be underestimated, notes one industry expert.
While Canada is exposed to a wide range of catastrophes, including earthquakes, flood, hurricane and wildfires, the insurance industry here has had relatively few major losses since the 1998 ice storm in Ontario and Quebec, Andrew Castaldi, Swiss Re's head of Catastrophe Perils for the Americas said Thursday.
In a webinar presentation sponsored by the reinsurance company, held in part with Canadian Underwriter, entitled "The Changing Canadian Risk Landscape", Castaldi said that globally, natural and manmade catastrophes with losses of over $5 billion have been increasing over the past decade, but Canada has been comparatively unaffected.
Many of the natural hazards that occur here, such as brush fires, have been away from populated centres, lowering the insured losses, he noted.
That’s actually problematic in a way, because it has made Canada a lower priority for catastrophe modelling, and the country may not be preparing enough for risks, he noted.
Investment in modelling tends to go to emerging markets, or areas of a recent high loss, he said. Updates on earthquakes here, for example, may be up to six years old, even though a lot can be learned from recent quake events in Japan and New Zealand.
Castaldi made it clear that the lack of significant losses doesn’t mean the potential for a major event doesn’t exist, and that losses could be high, especially when disasters strike more populated areas, where homes and technology are now more abundant, and damage has more of a financial impact than years ago.
Based on gross written premiums and gross domestic product, the loss potential for Canada is significant, even if the catastrophe isn’t necessarily the most major compared to others globally, he said.
One of the most significant hazards to the country remains flood, Castaldi said. Although not part of private policies here, it’s still a significant cause of damage, especially after events like last October’s Hurricane Sandy.
Poorly maintained infrastructure is also a critical issue facing Canada, he noted. Building codes are also inconsistent, and more populated urban centres mean that when a catastrophe strikes, the loss impact is greater.
More reliance on technology also means that when a disaster occurs, especially in a major centre, loss of power and associated business interruption losses are greater, Castaldi noted.
A recording of the Swiss Re-sponsored webinar, "The Changing Canadian Risk Landscape" is available here: http://bit.ly/canadianriskwebinar