Scott Kirkpatrick (pictured), commercial account executive at Johnston Meier Insurance Agencies Group, is well aware that public infrastructure investments and extreme weather are increasingly at the centre of conversations between governments and insurance companies. With natural disasters becoming more frequent, Kirkpatrick believes the priority must be on climate-resilient infrastructure.
“Fire-resistant materials in wildfire areas would be a big benefit for both insurance companies and governments,” he told IB.
Kirkpatrick recalled the 2021 Abbotsford flood, which revealed the inadequacy of infrastructure in withstanding extreme events.
“The city realized that their dikes had not been upgraded for a 100-year event like that,” he said, stressing that billions of dollars in upgrades are needed to prevent similar disasters. Floods, wildfires, and earthquakes represent significant concerns, and Kirkpatrick insists that seismic upgrades, especially for older buildings, are critical. Despite new building codes mandating earthquake resistance in high rises, older structures remain vulnerable. He suggested that government and insurance incentives could encourage retrofitting, a proactive measure that would help mitigate risks.
While floods and fires have been a growing concern over the last decade, Kirkpatrick said that earthquakes have been a persistent issue throughout his career.
“Earthquake has been a big concern... although we haven’t experienced one, when one comes, the insurers are concerned that it could wipe them out,” he explained. The financial impact of an earthquake in Vancouver or Victoria, highly built-up areas, could be devastating, driving high earthquake insurance costs. Kirkpatrick also added that, in some cases, the deductible can be as high as 25% of a building’s insured value, which translates into a staggering financial burden for property owners.
The challenge, however, is only further compounded by the issue of capacity.
“One of the larger insurers here decided to dump an entire portfolio,” Kirkpatrick explained. This move, driven by concerns over earthquake capacity, left him scrambling to find alternative coverage for his clients. He said that while insurers are largely reinsured, they remain cautious, knowing that a significant earthquake could severely impact their bottom line. This problem with capacity is pushing insurers to be more selective, often refusing coverage unless seismic upgrades have been completed.
The market for retrofitting buildings to withstand climate-related disasters, however, is complicated. Kirkpatrick told IB that while commercial buildings are inspected regularly, and building codes are updated to improve resilience, incentives for upgrades are lacking. He sees a potential opportunity for insurance companies to play a more proactive role.
“If insurance companies provided clear incentives, like a specific discount... for using fire-resistant or flood-proof materials, it would be in everyone’s interest,” he added. However, he acknowledged that the commercial insurance sector, in which he operates, has not yet seen these incentives materialize.
Kirkpatrick also touched on the impact of sophisticated flood hazard mapping on insurance pricing. As flood mapping improves, insurers are becoming more selective, leading to higher rates and deductibles in flood-prone areas.
“I’ve seen deductibles up at $250,000 for a flood on a commercial building,” he told IB, reflecting on how flood insurance has evolved from a near afterthought to a critical concern. This shift is driven by recent major flood events, such as those in Calgary and Abbotsford, which have forced insurers to reconsider their flood coverage strategies.
Given these evolving risks, Kirkpatrick sees a critical role for government intervention. He pointed to a National Flood Insurance Program as a necessary measure for those unable to secure private insurance in high-risk areas.
“If you’re in an area where coverage is not available, then you would be eligible for the disaster assistance coverage from the government,” he explained. However, he cautioned that this program would not apply to those who opted out of purchasing available coverage, leaving some exposed to significant financial losses in the event of a disaster.
Looking ahead, Kirkpatrick is concerned that certain areas in Canada could become uninsurable, much like fire-prone regions in California.
“An insurance company can only withstand so many losses before they decide that’s not working for them,” he warned. As extreme weather events continue to escalate, insurers are increasing deductibles and, in some cases, may withdraw coverage entirely. This trend, Kirkpatrick believes, could lead to a scenario where coverage is simply unavailable in certain high-risk regions.
In addition to the rising cost of coverage, Kirkpatrick pointed to a softening market as another significant trend. After four years of hard sales, where insurers set high prices and offered little flexibility, he is now seeing surprising quotes come his way. This shift marks a new phase in the insurance industry, one that Kirkpatrick is keenly watching. He suggests that the softening market could offer opportunities for those in high-risk areas, though the long-term outlook remains uncertain given the growing impact of climate change.
