The Insurance Bureau of Canada (IBC) is urgently recommending the implementation of a “climate score” system for homes, which would indicate a property’s susceptibility to catastrophic loss.
According to the bureau, the so-called Real Estate Climate Risk Index will be based on known risk factors for each property. It will work similarly to a credit or walk score for climate risks and would form the basis for managing the climate risks of households, communities, and municipalities.
IBC made its critical recommendation based on a report titled "Designing the Path to Climate Compatibility: Climate Risk Disclosure and Action in the Canadian Housing Context." The report was produced by leaders across the housing supply chain, who came together in the fall of 2021 to develop a framework which would communicate climate risk to homeowners as well as related tools to assist the housing finance and insurance sectors. IBC participated in the research, in partnership with Canada Mortgage and Housing Corporation (CMHC).
"Canada must develop a universal climate risk disclosure system by 2025," said IBC vice president of climate change and federal issues Craig Stewart. "We simply can't wait until 2050 to be climate compatible in the housing sector. Immediate action must be taken to protect homeowners and communities, or catastrophic loss to homes and communities will continue to increase in severity and cost, year after year."
In an earlier interview, Stewart told Insurance Business Canada that “the federal government urgently needs to accelerate work on climate defence,” adding that insurers need to be advocates against climate risk.
The report also recommended the creation of an “Action Matrix,” which would allow all housing market stakeholders to have a comprehensive view of a particular location’s risk and enable them to understand how to invest in that community to reduce said risk.
"Our collaboration with IBC on this effort is motivated by our need to respond to the accelerated frequency and severity of catastrophic loss events in the housing finance system, as well as the need to create an aligned view of climate risk for homeowners," said CMHC chief climate officer Steve Mennill.
