Weather Disasters and Canada’s Insurance Market: An Emerging Crisis?

By Likeleli Seitlheko, Economist, TD Economics —

• Canada has experienced around 300 catastrophic weather events since 1983, with both the frequency and cost of these disasters rising significantly in recent years.
• Over 60% of total insured losses caused by weather disasters between 2008 and 2024 stemmed from damage to personal property. 
• Average insured personal property losses have nearly doubled in the past five years compared to previous years, putting significant pressure on Canada’s home insurance sector for both insurers and households faced with rising home insurance rates.
• The increase in home insurance costs was generally higher in areas that have experienced greater insured damages from weather disasters. As well, some highly-impacted areas also face rising deductibles or reduced coverage for certain perils like hail or floods.
• Fiscally-constrained governments are also rethinking the level of financial assistance provided through disaster recovery programs to support communities recovering from uninsurable losses as costs of weather disasters rise.

Canada has seen more than 300 catastrophic weather events since 1983. These are currently defined as weather disasters that cause at least $30 million in insured losses, though lower thresholds were used prior to 2022. The average number of annual catastrophic events has increased over time as have insured losses associated with these events. Insured losses vary by province with Alberta accounting for the largest share of total insured losses between 1983 and 2024, followed by Ontario and Quebec. These three provinces are the only ones that have been hit by billion-dollar-plus catastrophic events so far, with Alberta alone having had five as of 2024.

More than 60% of insured losses from 2008 to 2024 were due to damage to personal property. In addition, the costs have increased substantially in recent years with insured damages to personal property during 2020-2024 being almost twice their level in the previous decade. Moreover, the insurance industry in Canada incurred underwriting losses in the personal property line of business in 2023 and 2024 as insured damages and operational expenses exceeded revenue earned from premiums.

These changes have contributed to rising home insurance premiums, especially in areas hardest hit by severe weather, with Alberta being the most notable example of the variation in insurance cost increases between more and less vulnerable areas. Additionally, high-risk areas face other adjustments to home insurance policies including higher deductibles – for example, for hail coverage in areas that have experienced substantial damage from hailstorms. In worst case situations, insurance coverage is simply not available for certain perils such as overland flooding in areas of the country deemed most at risk of flooding. Meanwhile, as households that are most vulnerable to severe weather are feeling the squeeze from the private insurance market, government disaster recovery programs, which have historically acted as an insurer of last resort, are also beginning to restrict the level of support provided to impacted communities as these programs are also contending with rising costs of extreme weather.

Insured Damages from Catastrophic Events Have Increased Significantly

Since 1983, catastrophic weather events have caused nearly $60 billion in insured damages as of 2024. Annual insured catastrophic losses have been rising over this period and exceeded $4 billion per year on average in the last five years, almost twice the level during 2010-2019 and significantly greater than losses incurred in the decades prior to 2010 (chart 1). These estimates include physical damage to vehicles, personal and commercial property as well as non-physical costs like disruptions to business operations or additional living expenses incurred by displaced individuals. However, most of the insured losses were due to the physical damage caused by severe weather. Moreover, in almost every single year since 2008, insured personal property losses accounted for over half of total insured catastrophic losses.

The decadal increase in insured catastrophic losses has been driven by a higher frequency of severe weather events and more costly individual weather disasters in recent years. In the 1980s, there were about two catastrophic events on average per year while the 2020-2024 period averaged 15 events annually. As would be expected, the more events there are, the greater the damage to properties and infrastructure is likely to be, all things being equal. In addition to this, the average insured cost per event has exceeded $200 million since 2010, roughly double its level during earlier decades (see Table 1, below). The top 10 list of the costliest severe weather events in Canada also illustrates the same point that extreme weather is causing increasingly greater damage to properties and infrastructure. Nine of the ten most damaging events happened during 2010-2024, with the 1998 Ice Storm being the only outlier on this list.

Table 1: Average Number of Events and Insured Loss per Catastrophic Event by Decade

SOURCE: Source: Insurance Bureau of Canada, CatIQ, TD Economics.

Ontario More Prone to Catastrophic Events, But Alberta Has Suffered Greater Losses

Every region in Canada has sustained severe weather incidents that cause catastrophic insured damages, except for Yukon and Nunavut, which is likely to do with the small populations and economies of the territories. Ontario has been affected the most, having been hit by around 36% of the catastrophic events that happened between 1983 and 2024. Alberta (32%), Quebec (25%), Saskatchewan (18%) and Manitoba (11%) were hit by the next highest number of these events, with the remaining regions being affected by less than 10% of the events.¹ While insured losses in individual provinces may not meet the catastrophic definition threshold for some weather disasters that affect multiple provinces, such events are still included in the count of each of the provinces they affected in these estimates.

Although Ontario has been hit by the highest number of catastrophic events, Alberta accounts for the largest share (42%) of insured catastrophic losses incurred since 1983, equivalent to the combined share for Ontario (24%) and Quebec (17%), the second and third highest ranked regions for losses (chart 3). As of 2024, Alberta had been hit by five severe weather events that included two wildfires, two hailstorms and a flood, which caused over a billion dollars each in insured losses in the province. These events represent half of the province’s insured catastrophic losses between 1983 and 2024 and just over a fifth of the national amount and help explain the gap in insured losses between Alberta and other provinces. Ontario and Quebec are the only other provinces that have had severe weather events that resulted in billion dollar-plus insured losses.

Read the original post by TD Economics for additional charts and further information, including:

• Personal Property Losses are Straining the Home Insurance Market
• Insurance Costs Increased More in Areas Most Affected by Severe Weather
• High Risk Areas Also Face Adjustments to Insurance Coverage
• Government Support for Uninsurable Losses is Also Shrinking
• End notes and sources

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SOURCE: TD Insurance