Canada experienced a record-breaking year for catastrophic events in 2018, with insured losses reaching a staggering $2.4 billion. This has raised the question of whether Canada needs to increase its reinsurance capacity to better protect against future disasters.
According to the Insurance Bureau of Canada (IBC), there were 11 catastrophic events in Canada last year, including severe weather events such as floods, wildfires, and windstorms. This is a significant increase from the average of six events per year over the past decade.
The IBC also reported that the majority of these events occurred in Ontario and Quebec, with the two provinces accounting for 80% of the total insured losses. This highlights the need for increased reinsurance capacity in these regions.
Reinsurance is a form of insurance that insurance companies purchase to protect themselves against large losses. In the case of catastrophic events, reinsurance provides financial support to insurance companies, allowing them to cover the costs of claims and continue to operate.
With the increasing frequency and severity of catastrophic events, it is crucial for insurance companies to have sufficient reinsurance coverage. This not only protects the companies themselves but also ensures that policyholders are adequately compensated in the event of a disaster.
Some experts argue that Canada’s current reinsurance capacity is sufficient, as the country has not experienced a major catastrophic event in recent years. However, others believe that the increasing frequency of disasters warrants a reevaluation of the country’s reinsurance needs.
In addition to the frequency of catastrophic events, the rising costs of rebuilding and repairing damaged properties also contribute to the need for increased reinsurance capacity. As construction and material costs continue to rise, insurance companies may struggle to cover the full cost of claims without adequate reinsurance support.
Furthermore, climate change is expected to bring about more frequent and severe weather events, making it even more crucial for Canada to have robust reinsurance capacity in place.
In response to these concerns, some insurance companies have already taken steps to increase their reinsurance coverage. However, it may be necessary for the industry as a whole to reassess and potentially increase its reinsurance capacity to better protect against future disasters.
In conclusion, the record-breaking year for catastrophic events in Canada has raised questions about the country’s reinsurance capacity. With the increasing frequency and severity of disasters, it is crucial for insurance companies to have sufficient reinsurance coverage to protect themselves and their policyholders. As the effects of climate change continue to be felt, it may be necessary for the industry to reassess and potentially increase its reinsurance capacity to ensure the country is adequately prepared for future disasters.
