Severe natural disasters are causing problems for the insurance industry
Severe natural disasters have been being reported in greater frequency around the world. Recent storms in the U.S. have put major strain on the insurance industry, but this is not a trend unique to the country. The Insurance Bureau of Canada has taken note of the increasing severity of weather-related disasters and has announced that it believes such disasters will become significantly more frequent in the coming years. Whether the insurance industry is capable of withstanding a high frequency of powerful natural disasters is not certain.
Insurance Bureau predicts disasters to become commonplace
According to the Insurance Bureau of Canada, Alberta accounted for 67% of the natural disaster claims payouts in the country. Alberta has fallen victim to a string of powerful natural disasters that have caused significant damage to properties, vehicles, and people. The Insurance Bureau claims that storms that had only happened once every 50 years are now happened every 15 years, placing the insurance industry in a very precarious position.
Insurance industry may not be prepared for the future
Don Forgeron, CEO of the Insurance Bureau, suggests that Canada has done nothing to prepare for the onslaught of frequent natural disasters. Nearly a decade ago, these disasters represented approximately $100 million in payouts, but these costs grew to more than $1 billion by the end of 2012. While the insurance industry understands the risks associated with natural disasters better than most. Businesses have had relatively little incentive or encouragement to protect themselves from the risks they face.
Natural disasters may cause insurance costs to spike
The increasing frequency of natural disasters is likely to cause insurance rates to spike in some parts of the country. The insurance industry is already raising rates in Alberta to account for higher risks. The Insurance Bureau suggests that Calgary may soon see insurance rates growing as well as natural disasters become more frequent throughout Canada.