The Weather is getting Worse…Adaptation is the solution
The weather is getting worse. The number of natural disasters is on the rise. Winter weather across most of the country broke records as unseasonably warm and ended in a heat wave. The cost of severe weather is rising along with the temperature. In response, it is crucial that we learn to adapt – as a country, as individuals and as businesses.
Canadian home, car and business insurers have seen claim payouts from severe weather double every five to 10 years since the 1980s. And for each of the last three years in Canada, natural catastrophe losses have been near or above $1 billion, with losses exceeding $1.7 billion last year.
The situation is the same worldwide. Munich Re, a global reinsurer, put 2011 economic losses as a result of severe weather at $378 billion, a record by all accounts and a payout number too large for most corporations to imagine.
Insurers have watched the mounting storm from front-row seats as water losses outstripped fire losses in many parts of the country, and claims costs rose. But insurers aren’t the only businesses affected. Severe weather is presenting a growing challenge to all Canadian businesses.
Businesses large and small are hurt. Consider the cost of physical damage to buildings and facilities; the loss of inventory and equipment; extended power interruptions; and displaced workers.
Think, too, of the additional challenges associated with a reduced workforce, diminished customer base and the need to accommodate owners and employees who are tending to immediate needs on the home front. The costs can be dramatic.
According to Canada’s National Round Table on the Environment and the Economy, none of this is going to change anytime soon. The Round Table was established by the Canadian government to find sustainable ways to help preserve our environment while building a strong economy.
That think tank asserts that, without strategic adaptation measures that help communities prepare for, and respond to, severe weather events in effective new ways, the situation is bound to get worse.
Insurers have had a long-held response when disaster strikes – repair the damage, protect customers from financial ruin. Our role has been to help customers, including commercial customers, rebuild and recover. But the insurance industry is now taking on another important role in this current challenge. We’re speaking up about the need for adaptation strategies at all levels of Canadian society.
We have a responsibility to encourage solutions and work with government partners, the private sector, citizens and community groups to minimize the impact of severe weather.
While the science has confirmed that the weather is getting worse, we also know that aging water and sewer infrastructure failure is to blame for most of the damage. In 2007, the Federation of Canadian Municipalities (FCM) released a study authored by McGill University that upheld that view. Their findings are sobering. They calculated that Canada has a water and sewage infrastructure deficit of $12 billion.
The decades-old systems can’t handle the increase in water as a result of worsening weather. Repairing our aging water and sewer infrastructure is an obvious starting point.
To quote from the study for FCM called Danger Ahead: The Coming Collapse of Canada’s Municipal Infrastructure, “Across Canada, municipal infrastructure has reached the breaking point. Most was built between the 1950s and 1970s. And much of it is due for replacement.”
The aging network of pipes and sewers meant to channel excess water is simply unable to cope with the increased precipitation pouring from the skies. We know that. And more and more governments at all levels know it too.
Several provinces including Ontario and British Columbia have included adaptation as a key part of their climate change strategy. In some parts of the country, repair money is starting to flow. Nova Scotia, for example, is investing in adaptation through the Atlantic Climate Adaptation Solutions Project, a co-operative enterprise between the federal government and the Atlantic Provinces.
These are good signs – intergovernmental co-operation is critical.
The federal government’s recent announcement of a domestic climate change adaptation strategy and a pledge of close to $150 million to deal with the effects of climate change on our health, economy and security is another major first step.
While $150 million is a good start, it is not enough to address the adaptation problems our country faces. So our message to Ottawa is to take this commitment even further.
In December 2011, I met with Finance Minister Jim Flaherty in Summerside, PEI, during pre-2012-budget consultations. At that meeting, I encouraged Minister Flaherty and the federal government to undertake a focused effort to work with all other levels of government to improve water and wastewater infrastructure. Such focused, intergovernmental co-operation is critical to building our resilience to severe weather patterns, and to minimizing associated economic and insured losses.
The money spent on fixing problems pays off. A great Canadian example is the $63 million spent to build the Winnipeg Floodway back in the 1960s. Critics dubbed it “Duff’s Ditch” after then premier Duff Roblin who championed the project. But Duff had the last laugh – in the past 30 years, his “ditch” has been needed 20 times and saved $10 billion in damage.
Many municipalities across the country – such as Halifax, Saint John, Fredericton, London, Winnipeg and Coquitlam – have already embraced adaptation, and are doing great work to make sure they are ready for severe weather.
Other municipalities would do well to follow their lead. When homes are flooded, when treasured possessions are lost, when lives are uprooted, it’s bad for individuals, it’s bad for communities and it’s bad for business.
In the face of increasing severe weather, every business must do its own due diligence and develop an enterprise-wide risk management process to ensure that it has adequate insurance coverage. It also must take appropriate steps to protect its facilities, its workers, its supply chain and other aspects of its operation from the damage caused by severe weather. But individual businesses can’t do it alone.
With a joint and concerted effort and with infrastructure improvement as our priority, we can make a difference together. I invite you to join our industry in facing and overcoming what may be our most pressing challenge of the 21st century.
Don Forgeron is President and CEO of Insurance Bureau of Canada. Insurance Bureau of Canada is the national industry association representing Canada’s private home, car and business insurers. Its member companies represent 90 per cent of the property and casualty insurance market in Canada.