The costs of climate change are rising
Debate about reducing Canada’s greenhouse gas emissions frequently references the costs of different policy choices going forward. There is comparatively little debate about the current and expected economic costs of climate change. Policy debate and decisions need to recognize that there is a cost to doing little or nothing to curb emissions.
Real and rising costs are now being felt in two key areas: the economic and financial impact of increasingly severe weather, and the impact on public infrastructure.
Climate change is already having a significant effect on the property and casualty-insurance industry, with immediate business implications for insurers and their clients. More frequent extreme weather events have increased the level of weather-related insurance claims for floods, forest fires and other catastrophic events, globally and locally. For example, the Organization for Economic Co-operation and Development reports that annual losses from overland flooding have grown to more than US$40-billion annually in recent years; more flood events occurred in 2010-13 than in the whole decade of the 1980s.
Canadian insurers are now facing claims on natural catastrophes – floods, forest fires and other extreme weather events – of approximately $1-billion annually, according to the Insurance Bureau of Canada. This amount has grown from $400-million annually in previous decades. Claims are expected to continue to increase, as is damage to personal property and public assets. This aggregate number does not include smaller events that are not considered catastrophic (an event with total claims less than $25-million), so the full impact of climate change on Canadian insurers and clients is likely understated.
Similarly, there has been a related dramatic rise in government funding and liabilities owing to flood damage and other catastrophic events. In Canada, annual liabilities of the Disaster Financial Assistance Arrangements (DFAA) – managed by the federal and provincial governments – have risen steadily. These costs increased from around $100-million annually two decades ago to $500-million in 2009-10; they reached a current high of $2-billion in 2013-14. The Parliamentary Budget Office projected that annual DFAA liabilities would average $902-million over five years, of which $673-million would be for floods. Based on recent and repeated flooding, those estimates may prove to be conservative.
The federal government and private insurers are now engaged in discussions, along with other stakeholders, with the aim of enhancing access to affordable flood-insurance coverage for most Canadians. Improving private-sector flood-insurance coverage across Canada would help to share flood risk across many insured parties, and should presumably reduce the pressure on governments to act as the de facto flood insurer of last resort.
https://www.theglobeandmail.com/business/commentary/article-the-costs-of-climate-change-are-rising/
Debate about reducing Canada’s greenhouse gas emissions frequently references the costs of different policy choices going forward. There is comparatively little debate about the current and expected economic costs of climate change. Policy debate and decisions need to recognize that there is a cost to doing little or nothing to curb emissions.
Real and rising costs are now being felt in two key areas: the economic and financial impact of increasingly severe weather, and the impact on public infrastructure.
Climate change is already having a significant effect on the property and casualty-insurance industry, with immediate business implications for insurers and their clients. More frequent extreme weather events have increased the level of weather-related insurance claims for floods, forest fires and other catastrophic events, globally and locally. For example, the Organization for Economic Co-operation and Development reports that annual losses from overland flooding have grown to more than US$40-billion annually in recent years; more flood events occurred in 2010-13 than in the whole decade of the 1980s.
Canadian insurers are now facing claims on natural catastrophes – floods, forest fires and other extreme weather events – of approximately $1-billion annually, according to the Insurance Bureau of Canada. This amount has grown from $400-million annually in previous decades. Claims are expected to continue to increase, as is damage to personal property and public assets. This aggregate number does not include smaller events that are not considered catastrophic (an event with total claims less than $25-million), so the full impact of climate change on Canadian insurers and clients is likely understated.
Similarly, there has been a related dramatic rise in government funding and liabilities owing to flood damage and other catastrophic events. In Canada, annual liabilities of the Disaster Financial Assistance Arrangements (DFAA) – managed by the federal and provincial governments – have risen steadily. These costs increased from around $100-million annually two decades ago to $500-million in 2009-10; they reached a current high of $2-billion in 2013-14. The Parliamentary Budget Office projected that annual DFAA liabilities would average $902-million over five years, of which $673-million would be for floods. Based on recent and repeated flooding, those estimates may prove to be conservative.
The federal government and private insurers are now engaged in discussions, along with other stakeholders, with the aim of enhancing access to affordable flood-insurance coverage for most Canadians. Improving private-sector flood-insurance coverage across Canada would help to share flood risk across many insured parties, and should presumably reduce the pressure on governments to act as the de facto flood insurer of last resort.
https://www.theglobeandmail.com/business/commentary/article-the-costs-of-climate-change-are-rising/
