Adapting to Change

I have warm memories of cold prairie winters. Some of my favourite recollections are of skating on outdoor frozen rinks, rivers and ponds with family and friends. As I grow older, it seems that opportunities for outdoor fun are shrinking and I often lament that today’s weather is not the weather of my childhood.

For once, perception is reality. A study released by Concordia University last year demonstrates there are fewer days capable of keeping rinks frozen and the chance of an even shorter outdoor skating season grows more likely as the climate continues to change.

This is just one example of how, within our own lifetimes, the environment is shifting.

A recent public opinion poll conducted by Pollara and Feedback Research, commissioned by Insurance Bureau of Canada (IBC), found that 91% of Canadians surveyed have noticed a change in weather in the last 10 to 15 years. Poll results indicate more than half of respondents believe that their homes will sustain damage because of climate change-induced weather in the next 10 to 15 years.

Despite that belief, only 8% of those surveyed thought Canadians, in general, are very actively preparing for severe weather.

THE ALBERTA EXPERIENCE

Between 1983 and 2008, Alberta averaged approximately $100 million a year in catastrophic losses. But in the past four years – from 2009 through 2012 – when Canada was hit by more than a billion dollars a year in insured losses, Alberta suffered the most. The province averaged a whopping $673 million a year in insured losses from natural catastrophes.

Below are some of the recent examples:

• in 2012, hailstorms wreaked havoc across the province, causing about $530 million dollars in damage;

• in November 2011, officials had to shut down the downtown core of Calgary during high winds;

• in 2011, fire ravaged the community of Slave Lake with losses pegged at more than $700 million; and

• in 2010, a hailstorm pounded Calgary with hailstones of almost five centimetres in diameter. The storm registered damage claims totalling $500 million.

Alberta was at the centre of 62% of all catastrophic insured losses in the country last year. Extreme weather events that used to happen every 40 years can now be expected to happen every six years.

Higher claims costs in Alberta may be the result of a number of factors, including greater frequency of extreme weather events and the increase in population, meaning more property that can potentially be damaged.

Some insurers in Alberta have responded by increasing the deductible for weather-related claims to as much as $3,000. This compares to an average $200 deductible in the province 20 years ago.

There are also underwriting changes to deal with the staggering claims. These policy changes have a direct impact on consumers and it is industry’s responsibility to educate the public about the reasons for change and what they can do to mitigate losses.

In the coming months, IBC will initiate a conversation – that we hope will be ongoing – with Albertans to educate and manage expectations about property insurance.

In late May, IBC president Don Forgeron spoke to the Calgary Chamber of Commerce about our severe weather challenge and the need to adapt. “Insurers could take the lazy way. We could simply raise premiums to meet these mounting payouts,” Forgeron said, but emphasized, rather, IBC’s commitment to the kind of leadership that solves problems.

The Pollara/Feedback Research poll found that 41% of Albertans surveyed believe that climate change should be a high priority for the provincial government. Insurers are now calling on the government to continue this leadership and include adaptation in their climate change plans.

TOMORROW’S WEATHER

The IBC-commissioned study by Gordon McBean, Ph.D., Telling the Weather Story, looked at the current environment and future weather patterns. Dr. McBean noted that, with temperatures rising, there will be more intense rain within much shorter time periods, putting pressure on infrastructure built to a climate that no longer exists.

In Calgary there may be water scarcity issues, as water levels in the Bow and Elbow rivers decline. On the other end of the scale, Alberta will continue to see flooding issues. Flooding has been the second most frequent cause of claims in the province. In 2005 alone, flooding in southern Alberta resulted in $300 million in insured payouts for sewer back-up.

And then there is Alberta’s “hail alley” – the most active and dangerous hail zone in North America. Those little balls of ice are the farmer’s foe and insurer’s nightmare. Insurers fund a hail suppression program based in Red Deer that has managed to reduce some of the damage.

Now it is time to look at building code and construction materials to find ways to make homes more resilient. Even the best cloud seeding program in the world cannot completely wipe out hail.

THE INFRASTRUCTURE CHALLENGE

Failing and over-capacity infrastructure is responsible for a significant portion of the insured losses in Alberta. Even as Canada’s economic leader, Alberta municipalities face fiscal challenges and are under significant pressure to allow new housing developments to support a booming population.

Municipalities must prioritize repairs and make thoughtful decisions about where they allow new development. In response, IBC is developing what is called a municipal risk assessment tool – MRAT for short – which will allow municipalities to identify their greatest sewer and storm water vulnerabilities. With that analytical tool, communities will be able to fund, plan and build according to their risk.

It is important to note that this year Premier Alison Redford made an important decision in the 2013 provincial budget, with the government’s three-year, $15-billion capital plan rising to the infrastructure challenge.

In order to support the five million new Albertans expected in the next two decades, the plan will use alternative financing tools as well as leverage Alberta’s triple-A credit rating for direct borrowing.

The storms and snow in Alberta will not subside in the foreseeable future. That means governments, businesses and consumers can – and must – work together to create a strong culture of adaptation.