Canadian Underwriter

Climate change expected to push up payouts

December 13, 2021   by Philip Porado

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It’s likely Canada’s not fully prepared for flood risks faces today, let alone for what climate change could bring, Judith Ellison, catastrophe modelling manager at JBA Risk Management told a Dec. 2 CatIQ Connect Quarterly session.

She noted many properties are flooding more than once. “And then you bring in things like rapid urbanization and growing population and increased … insured values,” Ellison said, “even without climate change there’s an increase in risk and payouts from severe weather, and those are going to continue to increase.”

Ellison said there needs to be more investment in understanding flood risk and building resilience. She added Canada is considering a flood insurance scheme, similar to the U.K.’s Flood Re program, which could help maintain affordability for consumers.

The concern though, said Josh Gilbert, CEO of Sust Global, is that such programs can support home building in poor locations, “because they know the government-backed insurance program will bail them out.”

Gilbert suggested the insurance market can evolve by using better data to make pricing decisions.

“What if … house owners could build resiliency into their own properties that could then be providing feedback to the insurance providers?” he asked. “If you raise the utilities off the ground by half a foot, that massively reduces the risk of flood damage.”

If you make that data available to the insurance sector, he said, companies could price risk better and then insurance premiums for those homeowners could go down.

Ever-improving climate models will also help craft resiliency, said Dr. Gregory Flato, senior research scientist, Environment and Climate Change Canada.

“To represent all the interactive features in the climate system, we have to keep building in more and more of the parts of the earth’s systems that interact with one another and, combined, shape the way the climate responds,” he said.

Modelling resolution improves as computing power grows. So, during the coming decade, Flato said emphasis will be on design of climate models that run efficiently on the next generation of super computers.


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