Ottawa launches consultation with insurance industry on earthquake costs and homeowners coverage

Open this image in the gallery:

Lonsdale Quay Square in North Vancouver in April. British Columbia has a 30 per cent chance of experiencing a major earthquake by 2075, according to Natural Resources Canada. Isabella Falcetti/The Globe and Mail

The federal government is launching consultations with insurers to review the industry's resilience to earthquakes — a catastrophic event that experts say could hit Canada within the next 50 years.

For decades, Canadian property and casualty insurers have been sounding the alarm about the country's lack of preparedness for a major earthquake off the coast of British Columbia. Natural Resources Canada estimates that the province has a 30 per cent chance of experiencing a major earthquake by 2075.

In the federal budget released in November, the government announced its intention to consult with federally regulated property and casualty insurers and other interested stakeholders on ways to ensure the stability of Canada's insurance sector in the event of a severe earthquake.

Benoit Sabourin, spokesman for Federal Finance Minister François-Philippe Champagne, said the timetable and scope of the consultation “will be issued in due course.”

“Insurers are well positioned to respond to earthquakes, with enough resources to cover insured losses for a one-in-500-year event,” Mr. Sabourin said in an email. “However, more can be done to ensure Canadian consumers are protected by a financial system resilient to more severe earthquakes.”

Liam McGinty, vice-president of federal affairs for the Insurance Bureau of Canada (IBC), said the federal commitment is encouraging, but it's just a first step.

“We are pleased that the government is finally recognizing the risk of earthquakes as we do – which represents a significant risk to our economic resilience,” Mr. McGinty said in an interview. “I can't think of a greater risk that could bring down our economy than this one, and it would have ripple effects across Canada.”

He added that a major earthquake would not only create challenges related to the financial solvency of some insurance companies, but would also have an impact on the mortgage and banking sectors.

Canada experiences an average of 4,000 earthquakes every year. Most are minor events that go unnoticed, but there are areas of the country located on fault lines, which can produce an earthquake of magnitude 7.0 or greater.

The most dangerous areas are the Pacific coast, known as the Cascadia subduction zone, and in Quebec and eastern Ontario, within the Charlevoix seismic zone. In 2025, a 7.0 magnitude earthquake struck the Yukon-Alaska border, while a 7.7 magnitude earthquake struck the Haida Gwaii archipelago off the coast of northern British Columbia in 2012. Both areas are remote, sparsely populated areas, and the earthquakes did not cause any major damage.

The largest Canadian earthquake ever recorded was in 1700 – an estimated magnitude of between 8.7 and 9.2 off the coast of Vancouver Island.

In a report released last month, IBC estimated that a 9.0 magnitude earthquake would result in total economic losses of $128 billion and 43,700 jobs over the next 10 years.

Insured losses could cost the insurance industry about $52.6 billion, more than 11 times the Fort McMurray wildfire in 2016, which cost insurers $4.7 billion in losses.

While Canada has among the highest industry capital requirements for earthquake risk — or the amount of money insurers need to set aside for claims — the IBC says the federal government must be “positioned to inject liquidity into businesses, stabilize markets and reassure Canadians that recovery is possible.”

In British Columbia, 92 per cent of the population and 90 per cent of businesses are at risk of being affected by an earthquake, and while earthquake insurance is widely available to homeowners and business owners, uptake is low, Mr. McGinty said.

It is estimated that about 40 per cent of British Columbians have purchased earthquake insurance for their personal property. In high-risk areas – such as Vancouver and Vancouver Island – this percentage rises to 50 per cent and 60 per cent, respectively, while about 70 per cent of commercial properties in British Columbia are covered.

Mr McGinty said the low uptake may be due to limited awareness, the high cost of premiums, a perception of low value for the price, as well as a misconception that earthquake cover is part of a standard home policy.

And in the Ottawa Valley and western Quebec — which have a fault line but are not vulnerable to a “thrust” event (an earthquake of at least 7.5 magnitude) — only 4% to 7% of residents have purchased earthquake coverage for their homes. There are no estimates for commercial properties in this area.

“For some people, there is also an assumption that the government will step in to provide financial assistance after the earthquake,” Mr McGinty said.

The low number of policies increases pressure on the insurance industry, because without enough premiums to cover risks, the industry will have to turn to the reinsurance market, which consists of insurers for the insurance industry, IBC said in its report. In recent years, reinsurance costs have risen significantly due to an increase in severe weather events.

Mr McGinty added: “A severe earthquake would likely exhaust the reinsurance capital of individual insurers, leading to bankruptcies.”

Canada remains the only G7 country facing significant earthquake risk and lacking a public-private partnership under which the government bears some degree of responsibility for damage.

Nearly 15 years ago, Japan implemented an earthquake disaster recovery system that helps rebuild homes and businesses, while Italy developed a national earthquake prevention plan. In the United States, the state of California has created a public-private partnership called the California Earthquake Authority, or CEA. The nonprofit provides financial support for earthquake insurance sold through private property and casualty insurance companies.

The Canadian insurance industry is calling on all stakeholders – including insurers, policymakers, provincial governments and citizens – to consider a federal support program, which would provide a “vital financial safety net” and enable a rapid recovery without placing the full burden on any one group.

“We need to look at a major earthquake as a question of when it will happen, not a question of if it will happen,” McGinty said. He added: “If we do not address the matter now, we may lose a critical moment with a federal government that has recognized these major financial risks.”

What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos