With more than $3 billion in weather-related catastrophe losses, 2013 will go down as “the year of the Cat,” says the head of one of Canada’s leading insurers – and the industry cannot suffer such a loss alone without all levels of government implementing some immediate change.
“One thing is crystal clear: the industry on its own cannot be the flood insurance provider without substantive commitment and change from all levels of government,” says Karen Gavan, the CEO of Economical Mutual Insurance Company, “and the implementation of changes that will proactively address the growing risks.”
The record-breaking catastrophic losses that came primarily from last summer’s Alberta flooding did show the “strength and resilience” of the industry, Gavan points out, but also underlines that proactive change is needed from government.
“Governments have to invest in infrastructure to handle the changing climate, not just to today’s standard — but by considering how it is going to be 20, 30 or 50 years from now,” she says. “There needs to be education about mitigation and effective disaster planning. And there has to be a backstop to the industry on absolutely catastrophic events.”
The previous yardstick for major catastrophic events was the 1998 Quebec ice storm, which had $1.6 billion.
Gavan, speaking at the Economical’s annual general meeting in Waterloo, Ont. recently, pointed out that in terms of net income, the company did better than the industry as a whole – but still took a hit from the number and severity of catastrophic claims in 2013. (continued.)
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“The industry suffered a 51 per cent decline in net income compared to the prior year,” says Gavan, “but we did better than the industry, declining 42 per cent to $88 million.”
Gavan credited the “resilience of our operations and the strong underlying performance of our insurance business” which allowed the company to emerge from “the worst cat year in our history with only a small underwriting loss of $2 million.”
