CBC News - Climate disasters lead to billions in insurance losses. Could they trigger a financial crisis?
“Climate change is creating whole new things to kill us, injure us, damage our properties and make insurance unavailable.”
Flooded vehicles stranded in the parking lot of a Toronto car dealership are pictured on July 16, 2024. (Evan Mitsui/CBC)
This recent article from CBC News highlights how climate disasters are causing record-breaking insurance losses, raising concerns about a potential financial crisis. In 2024, insurance payouts in Canada exceeded $8.5 billion, driven by events like wildfires in Jasper and flooding in Ontario and Quebec. Meanwhile, the wildfires in Los Angeles alone could cost insurers between $40 billion and $65 billion CAD, the most expensive in California’s history.
Experts warn that as climate-related disasters become more frequent and severe, insurance companies are adjusting by raising premiums or pulling out of high-risk areas altogether. Already, 1.5 million homes in Canada are ineligible for flood insurance, while major insurers have exited markets in California, Florida, and Louisiana. Rising premiums are making homeownership increasingly unaffordable, and in some cases, forcing mortgage defaults—a trend that some economists fear could trigger a financial crisis similar to the 2008 mortgage collapse.
“But just ordinary climate change was beginning to tell a story that the last 10 years are a very bad predictor of the next 10 years in certain circumstances, like property on the coastline”
Severe convective storms, a relatively new climate phenomenon, are now the leading cause of insured losses in North America. These storms, which can bring prolonged heavy rainfall, hail, and wind damage, accounted for over half of insured losses in the U.S. last year. In Canada, a single 20-minute hailstorm near Calgary in 2024 resulted in 70,000 claims and $2.8 billion for that one event.
The growing financial burden of extreme weather extends beyond individual homeowners. Reinsurance companies—multinational firms that provide backup coverage for insurers—are raising their own rates in response to escalating payouts. As a result, even Canadians living outside high-risk areas may see higher premiums.
As climate risks continue to escalate, initiatives like the Canada1Water project (C1W) are becoming increasingly essential. C1W provides critical data on changing water systems, helping policymakers, insurers, and researchers develop science-based strategies to mitigate risk and build resilience against future climate disasters.