November 6, 2012 by Canadian Underwriter
The Institute for Catastrophic Loss Reduction (ICLR) reports that large insured losses from extreme weather appear to be “the new normal” for the Canadian insurance industry, expecting that large-loss years will no longer be rarities.
As insured losses from extreme weather continue to be tallied for 2012, this year looks to be shaping up to mark the fourth consecutive year for billion-dollar-plus weather-related losses in Canada, ICLR suggests in a statement.
This represents an unprecedented run of losses and perhaps answers the question of whether the back-to-back billion dollar loss years in 2009 and 2010 were the start of a trend or a short-lived anomaly. Those losses were followed by the considerably more than $1 billion paid out in 2011 because of extreme weather and wildfires, notes the ICLR statement.
“While we consider the trend toward more and larger weather-related losses as being the ‘new status quo,’ this does not mean that Canadian insurers will experience billion-dollar loss years every year,” cautions Glenn McGillivray, managing director of ICLR. “Rather, we are simply stating that while there will continue to be good years and bad years for such losses, large-loss years will no longer be the rarities they were just a few years ago.”
ICLR attributes much of the trend to three sources: the increasing concentration of values, particularly in Canada’s largest cities; the poor state of Canada’s infrastructure; and change in the climate.