Jasper Mayor Richard Ireland, second left in blue, looks at what is left of his home of 67 years with federal Minister of Emergency Preparedness Harjit Sajjan, left to right, MLA Shane Getson, Premier Danielle Smith, Minister of Forestry and Parks Todd Loewen, and Minister of Public Safety and Emergency Services Mike Ellis in Jasper, Alta., on July 26.AMBER BRACKEN/The Canadian Press
Don Iveson is the former mayor of Edmonton, current chair of the Canada Mortgage and Housing Corporation and serves as executive adviser for climate investing and community resilience with Co-operators. Rob Wesseling is the chief executive of Co-operators, and chair of the International Co-operative and Mutual Insurers Federation.
After decades of relative price stability, Canadians are grappling with financial strain and uncertainty. The affordability crunch, especially in housing, is taking a toll on communities large and small across Canada. At the same time, climate disasters, such as the wildfire in Jasper, Alta., continue to devastate our communities.
While housing and climate change may seem like unrelated issues, it is important to examine where they intersect – and how they can be addressed together.
The federal government’s housing plan, released this year, identified three important ways to support affordability: building more homes, making it easier to rent or own a home, and helping Canadians who can’t afford a home. This is appropriate urgency to build new affordable housing.
But as climate risk increases, we also need to consider the costs required to keep housing secure over time – that is, ensure that future generations can afford to operate, maintain, finance and insure homes. That requires climate-resilient housing and infrastructure.
Indeed, as climate change-fuelled losses mount, insurance bills – and rates – are also rising. This is caused by interconnected factors, from urban growth into high-risk floodplains and wildfire-prone forest fringes, to more frequent and severe storms, bigger fires and serious floods. Across the insurance industry, claims payouts have jumped exponentially – more than $6-billion from just the past two years combined; triple the average of the last 15 years.
As these trends continue, the business model of insurance is under increasing pressure. Insurance works best if losses are relatively stable and predictable over time, but risks today are volatile and much harder to predict. Looking at the long-term trends in climate models, the prospects of sustainable, affordable protection become even more dire.
We can’t simply insure our way out of these challenges. We need a whole of society effort to build resilience. We need to broaden the traditional approach of risk protection to prioritize risk reduction. If we fail to evolve, then affordability – especially for underserved, climate-vulnerable communities – will increasingly be out of reach.
Thankfully, collaborative solutions can be seized if industry, governments, researchers and communities bring capital, expertise and resources to the table to reduce risk and build resilience.
Insurers can leverage our risk expertise and invest in risk-modelling capabilities and technologies to better predict and price climate impacts for customers. Importantly, such information must be available to decision-makers and Canadians alike to raise risk awareness and enable resilience-building policies and action.
Insurance coverage also needs to evolve to ensure more resilient rebuilding after major losses occur. If a roof needs replacing, for example, claim payouts should empower homeowners to install a new roof that is wind, hail and fire resistant. This is a major departure for insurers who traditionally put back “like for like.” Rebuilding with resilience is a virtuous circle: loss and damage is decreased over time, leading to a more sustainable and affordable insurance model.
We also need to think about resilience at community and regional levels. Insurers and other large asset owners can leverage their invested assets to finance climate adaptation infrastructure in communities.
They, in collaboration with municipalities, Indigenous partners, scientists and businesses, can uncover opportunities to invest in community resilience, including wildfire risk-reducing forest management practices; post-disaster home reconstruction that rebuilds net-zero optimized and climate resilient; and stormwater management improvements that will enable the development of new resilient housing in flood-prone watersheds.
The business case for resilience is strong. The Canadian Climate Institute, an independent research organization, estimated the benefit of climate adaptation investments as high as 15-to-one, accounting for reduced damage, less disruption and cleanup savings for governments. Of course, rapidly reducing greenhouse gases must remain a top priority, which can improve returns on adaptation with a positive compounding effect.
The path forward is complex, challenging and will require insurers, governments and Canadians to reimagine models that may have worked in the past, but are not set up for our future. This country has the resources and ingenuity required to build new models of resilience that will improve Canadians’ financial security.