Under Development

No matter where one stands on the issue of climate change, there is no denying the impact of increasingly severe weather over the past number of years. The Canadian insurance industry is still reeling from the repercussions of its most expensive year yet, with 2013 weather catastrophes totalling upwards of $3.2 billion in insured losses.

Needless to say, figures like this will get the attention of insurers and brokers alike. Soon enough policyholders will be taking heed as well – if they have not already – given the noticeable impact on rates typically arising from events of this scope and magnitude.

Industry-wide, there has been a push to inform and educate consumers about how insurance is adapting to this new reality, wherein “water is the new fire” – a reality to which no one is immune, whether or not an individual ever personally experienced a backed-up basement.

While an understanding of the issues at hand is a great starting point, the industry has reached a critical juncture at which it is time to do much more than simply be aware of what is going on. It is time to act.

That means everyone – insurers, brokers, customers, lawmakers and other bodies concerned with both environment and economy.

As a leading authority on climate change and its impact on our ecosystems, the World Wildlife Fund (WWF) has warned for some time that greenhouse gases being pumped into the atmosphere are transforming ecosystems around the world at an unprecedented rate. As a result, the world is warming more quickly than ever, with catastrophic impacts such as accelerating sea level rise, droughts, floods, storms and heatwaves, notes information posted on WWF’s website.

At a local level, industry stakeholders are seeing a growing number of events like the extreme flooding experienced last year in Alberta and Ontario, followed by a major ice storm in Eastern Canada and a perpetual freeze/thaw cycle. What is more, as the upward trend of urbanization continues, as noted by WWF, there are fewer places for all this excess water to go.

While a growing number of affluent Canadians are taking great pride in the oases they have built in upscale, finished basements, their high-end havens are increasingly vulnerable to costly water damage. As catastrophic weather goes up in severity and frequency, water itself is going down – as in pouring down – into basements, and into the pocketbooks of Canadian consumers. This not only puts strain on homeowners, it also places a great deal of onus on the insurance industry.

OPPORTUNITY FOR GUIDANCE

There are a number of things insurance professionals can advise people to do to mitigate or prevent damages to their homes, such as investment in proper installation of backwater valves, and proper maintenance in and around their homes.

RSA, for its part, is working with brokers to ensure customers are “Climate Smart,” which includes encouraging behaviours that help them mitigate damage to their property and prepare them for the impact of the increased frequency and severity of climate change-related weather events, while also helping to protect and preserve the environment. For example, using new hot water tanks and sump pumps can improve energy efficiency and also help to better prevent a major loss; connecting a rain barrel to the downspout will help divert rainwater while enabling homeowners to reuse this water for irrigation.

While it makes good sense to share practical solutions that will empower customers to make good choices, the individual consumer is by no means the only part of the equation. Aging and inadequate infrastructure Canada-wide has been a major issue for the insurance industry for at least the past 25 years, notes The State of Canada’s Cities and Communities, a report issued by the Federation of Canadian Municipalities (FCM), and the added strain of climate-related catastrophes is certainly not helping.

Dealing with the Deluge: urban water management in a changing climate, a report by WWF in partnership with RSA Group, warns that climate and land use change will have significant impacts on water, affecting patterns of rainfall, run-off and river flow with greater uncertainty and variability.

As towns and cities are increasingly forced to cope with high volumes of surface water, better, more sustainable drainage solutions must be implemented. Examples of sustainable drainage systems can include wetlands, ponds, green roofs, permeable paving and urban river restoration.

Evidence suggests that retrofitting sustainable drainage systems can result in multiple benefits, including improved water quality; reduced carbon emissions (because less water volume means less sewage treatment); reduced pluvial and sewer flood risk; aquifer recharge (relieving stress in water-scarce areas); enhancement of urban spaces; and increased biodiversity, notes the report.

In Canada, a number of municipalities, conservation authorities and other bodies with shared objectives have started some excellent work that looks more closely at how to build more climate-smart communities. The Insurance Bureau of Canada’s (IBC) current work on the Municipal Risk Assessment Tool is one example of a growing commitment from industry bodies and local governments to investigate better planning options for city infrastructure.

LOW IMPACT, HIGH REWARD

The other part of the equation is finding and using available resources to help mitigate this impact, including Low Impact Development (LID), which essentially means implementing infrastructure design that helps manage stormwater run-off.

LID practices include bioretention, permeable pavements, green roofs and other practices, such as soakaways, infiltration galleries and vegetated swales with perforated pipe systems, Canada Mortgage and Housing Corporation (CMHC) notes in its report, Equilibrium Communities InSight: Green Infrastructure and Low-Impact Development.

Some of these terms may be unfamiliar, but they are all greener, eco-friendly solutions that involve diverting water flow back into the environment, instead of sitting in the basement of someone’s home.

From a city planning perspective, examples of multi-stakeholder efforts include a retrofit project between the City of Mississauga and Credit Valley Conservation in Ontario, which used LID practices to capture and treat stormwater run-off through permeable pavement and bioretention planters, while reducing the city’s stormwater management costs; and a sustainable community demonstration initiative, funded by CMHC and Natural Resources Canada, with EQuilirium Communities to support research and technical activities related to green infrastructure and LID in rural and urban communities across the country.

Additional studies funded by CMHC will include further investigation into these techniques, from environmental and technical factors to the regulatory issues and long-term costs associated with these initiatives.

WATER ALL AROUND

Water really is everywhere – literally and figuratively. While the water issue is a significant and potentially daunting one, it is also quite heartening to see that water mitigation strategies can dovetail very well with actions to preserve the health of our ecosystems.

Not only will Canadians be able to spend more uninterrupted time enjoying man caves, home bars and the other myriad features of the Great Canadian Basement, but the hope is that the work being done will also enable us to leave a better planet for the generations yet to come.

Insurers and brokers have a fiduciary responsibility to customers; it is necessary to arm them with all the necessary information to help them mitigate or prevent damaging scenarios from occurring. That starts with sharing valuable risk control knowledge, ensuring that customers are not only informed, but motivated, to act in their own best interests – and that of the environment.

There remains a lot of work to do on all levels. Progress will have to includ
e lobbying efforts by bodies such as the IBC, and sustained collaboration across all groups toward the common goal of essentially making life better for customers while preserving the health of our planet.