Canada might be relatively insulated from the impacts of the devastating and intense hurricanes that have hit the US during the current storm season and in previous years, but that doesn’t mean the country, and the Atlantic coast in particular, is completely protected from these natural catastrophes.
Hurricane Teddy, which has since been downgraded to a post-tropical storm, is already raining down on the region, and has incited warnings from officials encouraging residents living in high-risk areas to temporarily get out of the storm’s way. And Teddy is far from the first storm to bear down on the eastern coastline.
In September 2003, for example, the remnants of Hurricane Juan impacted the region, explained Dipika Deol (pictured), head of underwriting, Canada & English Caribbean at Swiss Re, “and that’s probably the most significant event that we’ve seen so far, where in 2003 dollars, the impact was close to $150,000.”
Fast forward to 2008, again in September, remnants of Hurricane Kyle washed over Atlantic Canada, though the loss amount was less than $25,000. Nonetheless, “It’s still important to bear in mind that the event did occur, even if it didn’t [lead to] so much property damage, because it definitely impacted the people who lived there at the time,” said Deol.
Another recent example of a storm hitting the region was the tail-end of Hurricane Igor in September 2010, which resulted in losses of $50,000. Finally, in 2019, Hurricane Dorian transitioned to a post-tropical cyclone and, by the time it struck Nova Scotia, the strong winds knocked out power to almost half a million customers and caused more than $100 million in insurance losses, with total economic losses coming in even higher.
The common thread through these significant events has been the fact that they tend to occur in September, and that they do cause damage. “It’s not something that happens as infrequently as one might think,” noted Deol. “The risk communities in Canada face from extreme weather is growing and the cost of natural catastrophes is rising.”
As a result of this pattern of recent storm events, Canadians are becoming more prepared to deal with the risk.
“Canada has made very good progress in strengthening its resilience to the impact of natural catastrophes at-large,” said Deol. “If you’re looking at the level of communication that’s brought out to the regions that are impacted, I would say the warnings and watches are done in very timely fashion from authorities and, most importantly, they are actually being followed by the general public,” though she added that there’s more work to be done on awareness and resilience.
After all, the protection gap, which is the difference between the full economic losses that occur after an event versus insured losses, is still significant. For 2019, the global losses on an economic scale were US$146 billion, while insured losses came in at US$60 billion, according to Deol, indicating that 58% of global losses in 2019 were uninsured. Furthermore, US$52 billion of those insured losses were natural catastrophe-related.
The root causes of the protection gap include issues such as underinsurance, where a policyholder may not be getting insurance for the full value of their assets. It can also result from a lack of insurance due to poor awareness on the part of the policyholder or the broker who is helping them get coverage, as well as the unaffordability of insurance, since a policyholder might be living in an area where rates are simply too high for them. There can also be other limits to insurability, seen if the policyholder is living in a region for which insurers are not providing coverage.
To help strengthen community resiliency to these events and other natural catastrophes, Swiss Re has a number of initiatives that it employs, including keeping these issues top of mind for clients and brokers, and interacting frequently with industry and trade associations on natural catastrophe-related topics. Most importantly, Swiss Re brings together many stakeholders when discussing the peril of hurricanes.
“When we’re looking at the protection gap issue, it’s not something that’s only contained to the policyholder, insurer, and reinsurer – we really have to bring all stakeholders to the table,” said Deol. “So, we work very closely with decisionmakers at the government level and public sector institutions to further the understanding of the risks that we are seeing as a nation, so that we can jointly and appropriately mitigate and adapt policies … to ensure that our society is as resilient as possible.”
