Mother Nature’s wrath

Alberta is no stranger to natural catastrophes. The province holds the notoriety of enduring six of the Top 10 insured disasters in Canadian history.

Whether it be flooding, hail, or forest fires, Albertans have seen Mother Nature wreak havoc on the Wild Rose Province’s home and business owners over the years. And with the increased risk of costly claims comes potentially higher insurance premiums.

“Insurance is about risk,” said Bob De Pruis, western director of consumer and industry relations for the Insurance Bureau of Canada (IBC). “Some geographical regions across the country are at higher risk for specific perils, and premiums are commensurate with risk.”

De Pruis would not comment on the specific cost of insurance premiums in Alberta, given the competitive market and varying rates between providers.  A recent home insurance study by LowestRates.ca found that personal property home insurance rates in Alberta increased by 1% in 2020 Q3 over the same period as last year, while condo insurance rates soared by 16%, which LowestRates.ca attributes in part to damaging weather events.

Speaking hypothetically, De Pruis observed that some individuals and companies in the property and casualty insurance industry might look at regions differently based on the regions’ risk profiles. Judged by the numbers alone, Alberta may hold the title of the riskiest region in the country.

By far, the costliest insurance claim in Canadian history was the 2016 Fort McMurray wildfire, with $3.9 billion in insured damage. (This spring, insurers paid out an additional $522 million for damage caused by flooding in Fort McMurray.) The 1998 Quebec ice storm is second, trailing far behind at $2.3 billion. Flooding in Southern Alberta in 2013 is third at $1.7 billion. Next was a June 2020 hail and rain storm in the Calgary area that cost insurers $1.2 billion.

Alberta claims three spots in the Top 4. And with three more spots in the Top 10 — the 2011 Slave Lake fire, the 2014 Central Alberta hail and wind storm, and Calgary’s 1991 hail storm, each with a price tag of nearly $600 million — “risk” seems to be Alberta’s middle name.

Kyle Brittain is a meteorologist for The Weather Network in Alberta. He points out that five of the province’s most significant weather catastrophes have occurred over the past decade.

“While long-term trends are assessed over longer periods of time, it certainly seems as though there has been an uptick in high-impact weather events in Alberta in recent years,” said Brittain, adding that Alberta can also see severe winter weather and tornadoes. “Alberta’s unique geography makes it somewhat prone to these weather events, which can impact all areas of the province.”

Brittain said the urban interface areas of the boreal region in Northern Alberta and along the foothills in Central and Southern Alberta are most impacted by wildfires. Flooding can be prominent due to a number of factors, including large mountain snowpack, a saturated ground from previous precipitation, and large, slow-moving and moisture-laden low-pressure systems that bring heavy rainfall.

“These terrain influences don’t exist in all areas of the country to the same extent,” said Brittain. “While devastating overland and river flooding can impact all areas of Alberta, the costliest floods have occurred in cities within 100 to 200 km from the foothills.”

Hail makes up the trifecta of severe weather events Alberta sees on a yearly basis. Once again, those majestic Rocky Mountains are to blame: They force moist air upwards, generating thunderstorms.

“Alberta’s high elevation results in the freezing level being closer to the ground, permitting more hail to reach the ground, which can be very large in severe thunderstorms,” said Brittain. “While severe hail can impact all areas of Alberta, it tends to be most frequent from the Calgary area up into central sections of the province, from the foothills east into the heavily-populated QE2 corridor [the highway that connects Edmonton and Calgary].”

But as De Pruis points out, severe weather is only one factor impacting the insurance market.

“Other factors like non-weather-related claims, low interest rates, increasing replacement value of property, repair/rebuild costs, and global reinsurance costs,” he said, “are all factors impacting the insurance market.”

The insurance industry is advocating for the strengthening of building codes and amending land-use planning to help reduce the chance of loss or damage. One such measure would include avoiding floodplains, where risk of flooding increases substantially, which result in hefty insurance claims.

More people, more catastrophes

In addition to mentioning that the weather has changed over the past few decades, George Hodgson points to another reason behind the increase in catastrophic weather events in Alberta: Population growth.

“We are seeing a lot more catastrophic events here, but I think damage from the catastrophic events, or at least the dollar value, has a lot to do with the fact that there are a lot more people in Alberta,” said Hodgson, the CEO of the Insurance Brokers Association of Alberta. “We’ve often been building in places where catastrophic events have always happened.”

Hodgson points out that in 1990, Alberta’s population was around 2.5 million, whereas now, that number has grown to more than 4.4 million, nearly an 80% increase over 30 years.

“I would be willing to bet that a very significant majority of those people are living in an area south of Red Deer,” said Hodgson. “If you have more people living in the hail belt, there are more houses in the hail belt, with more vinyl siding in the hail belt, those catastrophic events are going to cause a significant amount of greater damage than it would have years ago.”

The situation has raised eyebrows within the Canadian reinsurance community, which has voiced concerns in the past about Alberta being prone to natural disasters. But Hodgson notes that global reinsurance companies tend to take a long-term view, looking not only at Alberta or any specific region, but Canada, the U.S., and North America as a whole. They know some higher-risk areas like Alberta and the Gulf Coast regions, for example, can be challenging to insure. “It’s not that Alberta has had a [Hurricane] Katrina event or that type of thing,” Hodgson said. “What we’ve had is multiple events…We’ve had fires, hail storms, floods…We’ve had them all.”