ICLR Cat Tales July/August 2022

July/August 2022

CAT

Volume 16 • Issue 4

TALES

e-newsletter of the Institute for Catastrophic Loss Reduction

Inside this issue More guidance for commercial risk loss control 4 Canada is witnessing more thunderstorm impacts than ever before 5

Flood insurance take-up in Canada, 2021

By Bohan Li, Economist, ICLR

In this article, we examine trends in overland flood insurance take-up across Canada based on the 2021 CatIQ exposure data release. Flood-related events have caused over $5.5 billion in insured losses in Canada from 2012-2021.

With climate change, losses to flood in

ICLR Board of Directors Carol Jardine (Chair) • Wawanesa Ken Coley • Western Debbie Coull-Cicchini • Intact

Canada are expected to increase. Flood insurance can be an important tool to finance these losses if it is adopted widely across Canada. While overland flood insurance coverage for personal homes was introduced in Canada in 2015, its

Matt Davison • Western

addition as a rider to insurance policies is

Olivier Gay • SCOR

optional and take-up varies dramatically

Phil Gibson • Aviva

across the country and over time.

Paul Kovacs • ICLR Claus Kroll • Munich Re Canada Monica Ningen • Swiss Re Andy Taylor • Gore Mutual John Taylor • OMIA Dan Shrubsole • Western Rob Wesseling • Co-operators

We track personal flood insurance take-up in CatIQ data as a fraction of personal fire insurance take-up. In Canada, flood insurance exists as an additional endorsement to a homeowner’s or tenant’s insurance policy. We consider take-up both by number of policies (dividing number of flood insurance policies by fire insurance policies) and by value of insured property (dividing sum of buildings and contents covered by flood insurance policies by the same for fire insurance policies).

These numbers tend to be similar; when take-up by the value of policies exceeds take-up by number of policies, it suggests more valuable assets are more likely >

to be insured for flood. Please note this metric should not be interpreted as the overall penetration of flood insurance in a region since not all homeowners and tenants have insurance.

Flood insurance take-up rates have grown steadily over time in Canada. In 2016, the first year of data available in CatIQ and one year following its introduction, flood insurance take-up rates were roughly

The territories of Northwest Territories, Nunavut, and Yukon have flood insurance take-up rates very similar to those of the rest of Canada in 2021. As a fraction of total values insured, they were 43%, 58%, and 43% respectively. The rate of growth of flood insurance take-up over the past 3 years was much higher in the territories. Flood insurance take-up averaged below 5% of fire insurance take-up in the territories in 2018.

Alberta follows the general pattern of lower flood take-up in rural FSAs and higher flood take-up in urban FSAs more starkly than most provinces. Flood insurance take-up rates are high in Edmonton and even higher in Calgary, with some FSAs nearing or exceeding 90% take-up. Outside of these urban areas, few other FSAs exceed 40% take-up of flood insurance. >

Table 1. Flood insurance take-up as fraction of fire insurance, by number of policies CAN

AB

BC

MB

NB

NL

NS

ON

PE

QC

SK

2018

38%

27%

39%

11%

28%

26%

27%

40%

17%

45%

31%

2021

54%

53%

55%

20%

42%

38%

54%

57%

37%

57%

42%

Table 2. Flood insurance take-up as fraction of fire insurance, by value insured CAN

AB

BC

MB

NB

NL

NS

ON

PE

QC

SK

2018

39%

30%

45%

10%

31%

32%

31%

42%

21%

42%

30%

2021

55%

59%

53%

19%

41%

46%

54%

58%

38%

58%

41%

Source: CatIQ and ICLR

25% of that of fire insurance. Flood insurance take-up grew steadily to just under 40% by 2018. In 2021, the latest data release, roughly 55% of personal insurance policies have flood insurance.

However, flood insurance take-up is still low across many parts of the country.

Tables 1 and 2 show the personal flood insurance take-up rates as a fraction of fire insurance by number of policies and by value, respectively, across the provinces of Canada. There is significant variation in flood insurance take-up rates across the provinces. Manitoba had the lowest flood insurance take-up rates in Canada, with the next-lowest province having almost double the flood insurance take-up rates.

By contrast, Alberta, British Columbia, Nova Scotia, Ontario, and Quebec had over half of personal lines with flood insurance coverage in 2021.

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Flood take-up rates within provinces vary dramatically across Forward Sortation Areas (FSAs), or 3-digit postal codes.

Generally, flood insurance take-up rates were higher in metropolitan FSAs compared to rural FSAs. In the denser metropolitan FSAs, flood insurance take-up rates often exceed 70% of the fire insurance take-up rates. Some FSAs even see 80% or 90% take-up of flood insurance. In contrast, rural FSAs rarely exceed 60% take-up of flood insurance even in provinces with higher take-up rates.

Figure 1 maps Alberta’s flood insurance take-up by FSA, along with a zoomed-in look at the denser Calgary and Edmonton metropolitan areas (an unfortunate limitation of these maps is more populated FSAs tend to be smaller than less populated FSAs, so the size of an FSA does not represent its importance).

Figure 1. Province-level view, Alberta Source: CatIQ/ICLR

Figure 2: British Columbia (top), and Vancouver/ Victoria region (bottom) flood insurance take-up as fraction of fire, 2021, by value insured Source: CatIQ/ICLR

Figure 1. Calgary (left), and Edmonton (right) flood insurance take-up as fraction of fire, 2021, by value insured Source: CatIQ/ICLR

Ontario follows a similar pattern as Alberta (see Figure 3), although not quite as extreme. Rural FSAs tend to have lower take-up rates, but unlike Alberta, there are several rural Ontario FSAs with take-up in the 50% range. Ontario’s urban flood insurance take-up rate is still relatively high. Most of these FSAs are in the 60%-80% range, compared to Alberta’s 70%-90%.

By contrast, British Columbia and Quebec have a more even spread of flood insurance take-up rates across FSAs (see Figure 2 and Figure 4).

Urban FSAs in these two provinces still tend to have higher flood insurance take-up compared to rural FSAs, usually around 70%.

Notably, the Richmond and Delta FSAs have relatively low take-up rates compared to other urban areas, and even Vancouver FSAs tend to have take-up rates in the 60%-70% range. On the other hand, B.C.’s rural FSAs tend to have relatively high take-up rates, with most in the 40%-60% range. Quebec’s rural FSAs have even higher take-up rates on average with take-up almost never dropping below 40%. >

Figure 3: Ontario (left), Toronto (top right), and Ottawa/Gatineau (bottom right) flood insurance take-up as fraction of fire, 2021, by value insured Source: CatIQ/ICLR

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Figure 4: Quebec (left), Montreal (top right), and Quebec City (bottom right) flood insurance take-up as fraction of fire, 2021, by value insured Source: CatIQ/ICLR

The growth in the take-up rate of flood insurance from 2018 to 2021 has also been highly uneven across Canada.

Calgary, Edmonton, and Toronto were among regions that grew the most, with many of these FSAs growing around 30 percentage points. Some provinces,

such as Alberta and Quebec, grew relatively evenly across the entire province.

Other provinces, including British Columbia and Ontario, had mixed growth with some FSAs having almost no growth in the take-up of flood insurance. As FSAs with easier growth opportunities

approach universal take-up of flood insurance, it may be interesting to examine how provinces like Alberta and Quebec have sustained broad-based growth in flood insurance take-up and consider whether these approaches can be effective in other provinces.

Posted on CatIQ (July 5, 2022) by Bohan Li, Economist, ICLR

More guidance for commercial risk loss control As the result of increased loss experience generated by severe weather to commercial operations, ICLR was asked by several of its member insurers about commercial risk loss control, so the Institute has extended the reach of is research and outreach into loss control for smaller, nonengineered, non-complex risks. This is with the view of possibly extending that work into larger, more complex risks in the years ahead.

Under this new initiative, ICLR has thus far issued eight loss control bulletins under the “Mind your business” title.

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These include: > Questions every condo owner should ask > Protection of vehicle floorplans and fleets against hail > Make your business wildfire ready > Fire following earthquake and high-rise buildings > How to inspect and maintain your commercial roof > Farm and ranch wildfire guidance > Prepare your business for tornadoes > Preventing the collapse of partially-constructed new homes More bulletins are being added regularly and all are available in both English and French.

See https://www.iclr.org/commercial-insurer/

Canada is witnessing more thunderstorm impacts than ever before

This opinion piece was originally published in The Conversation (August 23, 2022)

Residents in eastern Ontario are still recovering after a tornado-producing thunderstorm left a path of destruction over 55 kilometres long and up to 1,400 metres wide in July.

Such thunderstorms, and the damage they leave behind, can have deep and far-reaching impacts on society and the economy, and they are only increasing.

In Canada, the new normal for yearly insured catastrophic losses has reached $2 billion – a significant increase from the $422 million per year between 1983 and 2008 – and a significant chunk of that is from thunderstorm-related severe and extreme weather.

We at the Northern Tornadoes Project and the recently launched offshoot – The Northern Hail Project – are often asked whether these severe and extreme weather events are on the rise, and if this has anything to do with manmade climate change? The simple answer is: it’s complicated.

The difference between severe and extreme

Severe thunderstorms occur in Canada every year, bringing with them large hail, damaging downburst winds, intense rainfall and tornadoes. More rare and of even greater concern are extreme weather events – with their size, intensity or even time of year well beyond what is typically expected based on past observations.

Extreme weather conditions include tornadoes causing damage rated EF3-EF5 and significant hail of over five centimetres in diameter. Extreme weather can also arise when large hail accompanies downburst winds – increasing the hailstone impact energy – or when a long-lived thunderstorm

During the night of July 23, 2008, the CN Tower in Toronto got struck approx. 20 times by lightning.

(Photo by Raul Heinrich)

system results in a derecho, which is a cluster of downbursts (and sometimes embedded tornadoes) resulting in intense damage over hundreds of kilometres.

In September 2018, for example, a tornado outbreak in the National Capital Region caused catastrophic damage resulting in over $300 million in insured losses. It is also the latest in the year that a tornado outbreak with up to EF3 damage has been recorded in Canada.

In June 2020, Calgary experienced Canada’s first billion-dollar hailstorm and fourth costliest natural disaster on record, with insured losses of $1.3 billion. The derecho in May 2022 that mainly affected southern Ontario took 12 lives, with early estimates of insured losses close to $900 million. And that’s just over the last four years.

How can we detect these trends?

Such events and their impacts cannot be adequately assessed and documented using standard operational weather observation platforms such as radar and surface weather stations.

Tornado tracks and hailswaths are inherently narrow and often pass between stations. Radar can capture some of the key meteorology, but not the impacts on the ground.

Comprehensive storm surveys by weather and engineering experts are required to fully assess and document the meteorology and its physical impacts through what we call an “event-based approach”. In fact, we recently added a social science component to such investigations to better capture the impacts on people and communities. > 5

The living database that results from these storm surveys can always be updated as new information is discovered.

This approach allowed the Northern Tornadoes Project to uncover one of the largest recorded tornado outbreaks in Canadian history – 23 tornadoes over two days in Québec – and increase the number of tornadoes documented across Canada each year. It has also allowed the new Northern Hail Project to recover and document Canada’s largest hailstone on Aug. 1, 2022.

The greater the length and better the quality of a national database of these events, the more likely it is that any severe and extreme storm trends will be detected.

Some progress has been made

The tornado data for Southern Ontario is of sufficient length and quality to allow us to begin to look for trends. A 2022 study found that the annual number of tornadoes recorded there since 1875 has grown substantially. But that is mainly

due to an increase in weak tornadoes – ones that might have gone unreported in the past but now fail to escape the attention of the expanding population with consumer-grade cameras at the ready and access to social media for sharing.

The same study found, however, Prairie tornado in D’Arcy, Sask. on June 15, 2021. (Photo by David Sills) that tornadoes rated F/EF2+ in southern established. It is also yet unknown Ontario occurred gradually later in the whether extreme storms are changing year since 1875, now peaking in late in ways that are different from severe summer rather than early summer. storms. But it’s still early and research in this area is growing rapidly.

Meanwhile, in the U.S., studies have shown that tornadoes may be occurring in bigger clusters and starting to shift eastward – away from the Great Plains and into more populated areas.

In all cases, clear connections to manmade climate change have not yet been

While storm trends are studied, prepare for increased impacts

Canadians are recording and sharing images and experiences of severe and extreme storms more than ever before, increasing the documentation of these events. As the population continues to grow and spread out, the damage and losses caused by thunderstorms will continue to grow.

At the same time, we are learning more about changing storm patterns and possible connections to climate change.

Continuing to increase the length and quality of our national severe and extreme storm event database is needed to better understand such changes. >

A map shows the starting locations and tracks of the 23 tornadoes that occurred during a two-day tornado outbreak in Québec in June 2017.

(Lesley Elliott and Liz Sutherland/The Northern Tornadoes Project)

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In the meantime, developing adaptation strategies to ensure resiliency and to lessen the impact of inevitable damaging storms is becoming increasingly important.

Improving upon building codes and other policies to promote more resilient buildings and communities is urgently needed to better protect the lives and property of Canadians.

Authors Gregory Kopp is professor of Civil Engineering & ImpactWX Chair of Severe Storms Engineering, Western University.

David Sills is Executive Director – Northern Tornadoes Project, Western University.

Damage from an EF2 tornado in Barrie, Ont. on July 15, 2021. (Northern Tornadoes Project)

Julian Brimelow is Executive Director Northern Hail Project, Western University.

Institute for Catastrophic Loss Reduction Mission To reduce the loss of life and property caused by severe weather and earthquakes through the identification and support of sustained actions that improve society’s capacity to adapt to, anticipate, mitigate, withstand and recover from natural disasters.

20 Richmond Street East Suite 210 Toronto, Ontario M5C 2R9 T 416-364-8677 F 416-364-5889 www.iclr.org www.PIEVC.ca

Western University Amit Chakma Building, Suite 4405 1151 Richmond Street London, Ontario, Canada N6A 5B9 T 519-661-3234 F 519-661-4273 www.iclr.org

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