The sticker price to fix Canada’s worst municipal water pipes

Given the huge insurance losses caused by natural catastrophes in Ontario and Quebec over the past month, insurers are calling on governments to focus on improving Canadian water infrastructure to handle the intensifying rainstorms. But funding the upgrades will be a daunting task.

More than $40-billion worth of Canada’s wastewater and stormwater assets are in either “very poor” or “poor” condition and in urgent need of repair, says a March 2023 report by Statistics Canada.

Aviva Canada CEO Tracy Garrad made the plea for a focus on infrastructure investments in an interview with Canadian Underwriter this month, and the Insurance Bureau of Canada made the same request of governments in a public release last week.

At the same time, the Federation of Canadian Municipalities has issued a call for the provinces and the feds to sit down a discuss a new model for funding municipal infrastructure.

 

How bad is it?

Canadian municipalities are responsible for roughly 60% of the country’s public infrastructure, including public roads and highways, and wastewater and stormwater pipes.

“According to Statistics Canada’s 2020 Core Public Infrastructure Survey, 14% of municipal waste and water infrastructure and 14% of municipal transportation assets are currently in ‘poor’ or ‘very poor’ condition and require immediate repair or replacement,” the FCM says in a 2024 report.

“Data from the CCPI survey highlights that the cost of renewing or rehabilitating all municipal assets currently in ‘poor’ and ‘very poor’ condition was in the range of $170 billion in 2020.”

For perspective, in its 2024 budget, the federal government projected total revenues for 2023-24 of just north of $465 billion and expenses of $497.5 billion.

FCM’s $170-billion number includes rehabilitation costs for transportation assets. But if you strip out the cost to repair deficient roads and focus just on Canada’s water infrastructure, Stats Can’s report finds more than $40-billion worth of Canada’s wastewater and stormwater assets are in either “very poor” or “poor” condition.

Of this total, just over $17.4 billion worth of Canada’s wastewater and stormwater assets rate as being in “very poor” condition. StatsCan defines very poor assets “as having an immediate need to replace most or all of the asset.”

“Health and safety hazards exist which present a possible risk to public safety or asset cannot be serviced/operated without risk to personnel. Major work or replacement required urgently. The operating asset has less than 10% of its expected service life remaining,” Stats Canada adds.

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A further $33.4 billion of Canada’s wastewater and stormwater assets are in “poor” condition.

This means “a failure likely and substantial work required in the short term,” StatsCan states. “Asset barely serviceable. No immediate risk to health or safety. The operating asset has less than 40% of its expected service life remaining.”

 

Motivation for change

Canada’s P&C insurers would certainly like to build more resilience into Canada’s water infrastructure, with record rainfall amounts soaking Ontario and Quebec this past month. Especially when an industry report as far back as 2012, Telling the Weather Story, predicted the frequency and intensity of rainfall would increase leading up to 2050.

When the remnants of Hurricane Debby swept through in July, Montreal received up to 100 mm of rain in just a few hours, and the Montreal-Trudeau International Airport recorded 79 mm of rain mostly in a single hour. (The previous record rainfall event at the airport was 33 mm.)

“It was a massive amount of rain and our sewer system isn’t built to catch all that water,” City of Montreal spokesman Philippe Sabourin told The Gazette in a July 12 interview. “Most of our sewer system was built in the ’60s. We weren’t at the time concerned about climate change and there is no way the city can change its water system in months. We will need years to complete this construction work.”

Canada’s P&C insurers expect to pay out more than $940 million for damage related to an Ontario rainstorm in July. And although official figures for the Montreal storm aren’t in, several industry sources say they would not be surprised to see both the Calgary hailstorm and the Montreal rainstorm’s insured losses — Debby’s rainfall caused 70,000 claims in Montreal, the city confirmed this week — each approach the $1-billion threshold.

Canadian insurers are well on their way to paying out more than $4 billion in insured NatCat losses in 2024. They paid out $3.1 billion for 2023.

 

Feature image courtesy of iStock.com/Aleksandar Tasevski