Extreme weather events once considered rare are now a regular threat. Insurers are redrawing risk maps and rewriting policies to reflect a harsher climate reality.
When it’s a weather problem, it becomes a financial problem. As climate disasters cause damage reaching $50,000 or more per home, insurers are being forced to reassess how they operate, according to Square One Insurance CEO Daniel Mirkovic (pictured).
In fact, the average cost per natural disaster in Canada has surged by 1,250% since the 1970s, escalating from approximately $8 million to over $110 million per event, according to the Insurance Bureau of Canada.
Rising construction costs are widening the underinsurance gap, with residential building construction costs increasing by 66% since 2019, significantly outpacing the 19% general inflation rate during the same period.
But Canada’s guaranteed building replacement coverage offers a rare safeguard. In Canada, guaranteed replacement cost coverage ensures that a home can be rebuilt or repaired to its original state after a covered loss, regardless of the cost, offering a safeguard against rising construction expenses.
In the face of escalating risks, Mirkovic said the system is being reshaped from the inside out, as insurers find new ways to define risk, reward resilience and stay connected to a generation of homeowners navigating uncertainty.
In response, insurers are reshaping their underwriting and pricing strategies. Homes with features that offer better resistance to wind, hail, fire or flooding may now be eligible for discounts; fire-resistant siding or interior systems like backwater valves and battery backups for sump pumps are key examples.
But adaptation also includes hard decisions - especially in high-risk zones, where some insurers are limiting or withdrawing coverage. Mirkovic encouraged consumers in these areas not to panic.
“For most insurable risks, there’s a lot of competition in Canada,” he said. “There are over 100 home insurance providers. If a customer is having difficulty, they need to shop around.”
When private insurance becomes unavailable, government disaster financial assistance programs may offer some support - but often with limitations. The industry continues to look for sustainable options to address risk-prone properties.
Rising construction costs have also contributed to an underinsurance gap, leaving some homeowners vulnerable. Canada’s guaranteed building replacement cost coverage offers a unique safeguard, covering the full cost of rebuilding - even if it surpasses policy limits - as long as homeowners insure to the recommended value and meet certain policy conditions.
“One of the things that sets Canada apart from many other parts of the world is that most policies include something called guaranteed building replacement cost coverage,” Mirkovic said.
Still, he urges homeowners to stay proactive.
“If you haven’t heard from your insurance provider, then it’s important to follow up with their provider,” he said. “Most insurance providers in Canada are aware of and take action on this because we’ve had a number of natural [disasters] like the wildfires that happened in Alberta last year and seem to happen in British Columbia every year.”
Beyond traditional homeowners, the commercial and rental markets are evolving to meet new realities. Landlords now have access to expanded coverage, including comprehensive or all-risk protection and, in some cases, the same guaranteed replacement cost coverage previously only available to homeowners.
“There has been a lot of development in the market,” Mirkovic said. “Some companies now offer products specifically designed for landlords and tenants.”
Tenants are also seeing more options. Expanded coverage now includes tenant protection insurance, which covers accidental property damage beyond major disasters.
“If they accidentally drop a pot on a glass cooktop and damage it, they’re on the hook for repairing it,” he said. “But with tenant protection coverage, they can make a claim, subject to a very small deductible of $250.”
As insurance providers expand offerings, brokers still play a critical advisory role - but digital services are becoming more dominant.
“Brokers definitely have an important role to play, especially for consumers who are just overwhelmed,” Mirkovic said. “But we find that a lot of customers like to self-serve. Especially younger customers—they don’t want to talk to someone; they don’t want to go into an office. They want to do an online search, find the information that’s important to them, and just act on it digitally.”
The future of the industry, he said, lies in continued innovation.
“We’re going to see even more innovation in how insurers underwrite, price and distribute insurance,” Mirkovic said. “But at the end of the day, home insurance remains the best and often only viable way for people to protect themselves from catastrophic loss.”
