Canada is contemplating its readiness for a potential major earthquake. Jason Clark, national director of climate change advocacy at the Insurance Bureau of Canada (IBC), recently issued a sobering assessment of the nation’s preparedness, warning of the economic and social consequences of the “big one”.
Canada has yet to experience a catastrophic earthquake in modern history, but experts warn it is only a matter of time. Simulations conducted by AIR Worldwide for the IBC modeled the impact of a 9.0-magnitude earthquake off Vancouver’s coast, projecting $95.6 billion in economic losses, with $26.1 billion stemming from insured damages. A Quebec scenario involving a smaller quake could still result in damages reaching tens of billions, IBC noted.
The report highlighted that such disasters could leave neighborhoods and businesses in ruins, disrupt essential services, and paralyze transportation networks. Fires, landslides, and liquefaction would compound the devastation. Beyond the immediate epicenter, nationwide consequences would emerge, including strained supply chains, widespread displacement, and overburdened emergency systems.
IBC emphasized that the financial toll of a major earthquake could overwhelm Canada’s property and casualty insurance sector, among the most capitalized globally. While the industry is designed to withstand typical disasters, a catastrophic earthquake could exceed its capacity, potentially destabilizing the sector.
Canada’s Property and Casualty Insurance Compensation Corporation (PACICC) offers a safety net, ensuring policyholders receive compensation if insurers fail. However, the sheer scale of claims from an event of this magnitude could strain PACICC’s resources, leading to a domino effect of insolvencies and prolonged delays in settlements.
Alarmingly, many Canadians in high-risk zones lack earthquake insurance. IBC estimates suggest over 50% of British Columbian homeowners and up to 96% in Quebec are uninsured, leaving them vulnerable to financial ruin.
The IBC emphasized the need for a coordinated national plan. A federal backstop, akin to the national flood insurance program under development, is proposed as a solution. The bureau said this public-private partnership would offer a financial safety net, distributing the economic burden and expediting recovery.
“Similar frameworks in countries like Japan and New Zealand show that such solutions can work effectively, distributing costs and ensuring a quicker, more equitable recovery,” Clark noted. He said Canada’s approach must be proactive, laying the groundwork for recovery before disaster strikes.
Clark noted, “Preparedness is not about immediate disaster response; it’s about creating a foundation for recovery ahead of time that doesn’t leave Canadians shouldering impossible losses in the future. By acting now, we can ensure that when the ground moves, Canada stands ready to rebuild, together.”
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