Insurance bureau executive exposes Liberals’ costly climate failure

A critical error in the Trudeau Liberals' 2015 climate plan has now put millions of homeowners at financial risk, says an Insurance Bureau of Canada executive.

“We were aghast,” Craig Stewart, Bureau vice president of federal affairs told a conference of meteorologists, per Blacklock’s Reporter.

“We need to start building better homes in better places,” said Stewart

“We need to address that gap on building codes.”

Speaking at a January 16 videoconference of the Canadian Meteorological and Oceanographic Society, Stewart said cabinet in its preoccupation with lowering climate emissions overlooked simple revisions to the National Building Code that now leave homeowners vulnerable to catastrophic losses.

Stewart’s speech was recorded. On Thursday he confirmed his remarks.

“The federal government gave direction when the National Building Code went through its five-year review and update, it punted the resilience elements of the Code to make way for energy efficiency,” said Stewart.

“We were aghast at this as an industry, that essentially new homes would be built prioritizing energy efficiency and it won’t be until 2030 at the earliest that new homes will be built with climate resilience built into the Building Code.”

“That’s problematic because we have a shortage of housing in this country.”

“We now have incentives to build about a million homes in the next five years and they will not be built to be resilient to severe weather.”

“The question within our industry is, who is going to insure those new homes?”

“There is pressure for those new homes to be built in places of high risk because some mayors such as in Windsor have said, ‘We don’t have anywhere else to build. We have to open up flood plains to build it.’ You package all of these things together and you begin to think, boy, we are on a bad trajectory unfortunately.”

Cabinet should have mandated Building Code revisions such as mandatory sump pumps and crack-resistant foundations in flood prone areas, wind-resistant hurricane straps for roofing joists, high grade roofing shingles in hail prone areas, or fire-resistant roofing tiles and replacement of vinyl siding with brick or stucco in regions at risk of wildfires, said Stewart.

“It is geographically specific,” he said.

“This is not rocket science.”

“To political parties as we head into a federal election this spring likely, if governments do not act, insurers will continue to reduce exposure in high risk areas across the country and we will see an emergence of insurance ‘deserts,’ which is what our federal regulator the Office of the Superintendent of Financial Institutions calls them.”

“Home and business owners will increasingly bear the risk on their own and be increasingly reliant on taxpayer funded bailout programs.”

“We’re not seeing insurance companies vacate markets in Canada. What we are seeing is companies are reducing their exposure by reducing the product. The biggest area where this is happening is hail around Calgary, where the product is changing. After three events in five years that exceeded $1 billion in losses, insurers are saying this is not sustainable. We have to do something. Hail, which was part of the core coverage, is now being broken out. It’s starting to become optional.”

Stewart told the Oceanographic Society that millions of policyholders face “protection gaps” in insuring property.

“These wildfires that have been happening have defied our models,” he said. “We did not expect the Fort McMurray fire. It wasn’t predicted in their models. No insurer predicted the fires that happened in Nova Scotia two years ago. So there is a deep distrust of wildfire modeling now in the insurance industry.”

“Protection gaps occur for several reasons. Insurers decide not to cover certain perils because they can’t be modeled. Landslides and tsunamis are not covered in this country by insurers.”

“Insurers decide to reduce the concentration of their book of business in certain regions because risk is no longer regarded as accidental. That would be flood plains across the country. There’s about one-and-a-half million homes on flood plains where the risk is no longer accidental. We know they are going to flood.”

No province regulates home insurance rates. Attempts to regulate premiums in California resulted in cancellation of many policies prior to January 7 wildfires in Los Angeles that killed 29 people and destroyed 17,000 homes, schools and businesses, said Stewart.

This is what happened behind the scenes,” he said.

“In Canada and the US reinsurance rates went up by as much as 100% in 2022. Insurers then had to absorb that. Insurers had to make a decision, and this was all due to severe weather and catastrophic losses. They could either pass it on to their customers or absorb it themselves. When you read the news on what is happening in California with insurance, this is the driver.”

“If you are an insurer and you’re in a market where you cannot raise the premium because of regulation as was the case in California, it no longer makes sense because you are paying much higher reinsurance pricing. You can no longer operate at a profit. It’s impossible to operate at a profit.”

California has regulated insurance premiums for 37 years. Voters in 1988 passed Proposition 103 mandating an immediate 20% cut in premiums for all policyholders and ongoing state regulation of rates.