CLIMATE CHANGE AND INSURANCE,
For more than two decades, insurance firms facing rising property damage costs in Canada and abroad have sought some kind of salvation in the environmental movement’s climate change crusade.
The latest insurance industry initiative wanders even deeper into the quagmire of green policy advocacy. Combating Canada’s Rising Flood Costs, a new report from the Insurance Bureau of Canada (IBC), urged governments across the country to adopt “natural infrastructure” to limit escalating climate change risks.
The report continues the insurance industry’s 20-year practice of hyping climate risks. At an industry conference in 1999, one executive warned: “The increase in extreme weather events (in Canada) is part of a global trend in which climate change has played a significant role.”
The evidence was nonexistent then, and not much has changed in the interim, despite the industry’s claim that climate-driven flood risk is escalating. According to the insurers, Canada needs all levels of government to turn to natural and “green” infrastructure before installing traditional “grey” infrastructure.
The first priority is to retain existing ponds, streams, trees and other natural infrastructure systems, according to the report. The second is to rebuild and replace natural infrastructure that has been lost. And the third — building new and replacing old sewers, pipes, concrete drain-ways, diversions, improved building techniques — should be undertaken only on a “build what you must” basis.
However, that’s not what the Ontario Society of Professional Engineers recommends. In an April report for provincial officials it said: “Numerous studies have demonstrated that green infrastructure does not provide a flood risk reduction benefit.” The engineers advised that protective plumbing, pump-station modifications and sanitary-sewer improvements are among the measures that should be taken to control urban flooding.
Insurers have an understandable self-interest in promoting infrastructure spending and government policies, laws and regulations that would protect their businesses from rising insurance claims. But the report reads like a document from the World Wildlife Fund. It was sponsored by the IBC and “generously supported” by Intact Financial Corp., Canada’s largest insurance company. The University of Waterloo-based Intact Centre on Climate Adaptation (funded by Intact, which has given millions to the centre) was also involved.
Despite the heavy corporate involvement, the CBC opened up about 10 minutes of The National, its flagship news show, to the industry report when it was released last month. Would The National give the pipeline, mining and telecom companies 10 minutes to promote their views?
The stars of The National that night were Blair Feltmate, head of the Centre on Climate Adaptation, and CBC News meteorologist Johanna Wagstaffe. Both repeated the insurance industry’s 20-year-old claims that climate devastation is ravaging Canada through extreme weather events — and warned the public to look out for rising insurance premiums if nothing is done. Here’s a sample:
Wagstaffe: “Every single extreme weather event is connected to a warming climate because… as we see longer and hotter summers, we see more moisture being held in our atmosphere, we see higher water levels, that means every single event is amplified by climate change.”
Feltmate: “I totally agree. So all the modelling on climate change that’s been done over the last many years by groups like the Intergovernmental Panel on Climate Change, which is a group of several hundred climate scientists… their predictions are that, yes, climate change has happened, is happening and will continue to happen. And we’re seeing the expression of extreme weather events as a result of that.”
Feltmate added the magnitude of flooding, which is the No. 1 cost due to climate change in the country, is increasing.
Such climate warnings have been official insurance industry mantra since the 1990s. Flooding and extreme weather are becoming more frequent, the industry said again and again.
Not true, according to the latest IPCC science report released this month. The impacts chapter said: “There is low confidence due to limited evidence, however, that anthropogenic climate change has affected the frequency and the magnitude of floods.” Furthermore, from 1950 to 2012 “precipitation and (fluvial) runoff have… decreased over most of Africa, East and South Asia, eastern coastal Australia, southeastern and northwestern United States, western and eastern Canada.”
Despite a lack of evidence, the industry recently claimed conditions are so bad in Canada that “weather events that used to occur every 40 years now happen every six years” — a factoid attributed to a 2012 IBC-commissioned report by veteran Western University climatologist and climate-policy activist Gordon McBean. He cited an Environment Canada report to support the 40-to-six claim, but in 2016 Canadian Underwriter magazine published a note quoting an Environment Canada official who said studies “have not shown evidence to support” the 40-to-six year frequency shift. The claim has since been scrubbed from the insurance industry’s communications on climate issues.
The insurers have a newer warning widget in the form of a graphic that appears to show a dramatic rise in catastrophic insurance losses due to climate change. A trend line rises from the mid-1980s to 2017 to a $5-billion peak with the 2016 Fort McMurray fire (see first accompanying chart). The new IBC flood report said these numbers illustrate the financial impacts of climate change and extreme weather events that are being felt by a growing number of homeowners and communities. These losses “averaged $405 million per year between 1983 and 2008, and $1.8 billion between 2009 and 2017.”
The graphic contains three dubious elements as a source for a flood report. First is an inconsistency in the source of data, a problem identified by Robert Muir, a professional engineer and member of in infrastructure task force at the Ontario Society of Professional Engineers. The 1983-2007 data set was collected through informal industry surveys, while the 2008-2017 data are tabulated systematically by an independent agency.
Data inconsistency may explain the bizarre result that the insurance industry had zero losses due to floods, water, rain and storm perils in four of 17 years between 1983 and 2000.
Second, the IBC graph also counts fire losses, including the Fort McMurray fire of 2016 — an event unrelated to flood risk. Removal of fire losses significantly flattens the curve (see the second accompanying chart). If the 2013 floods in Alberta and Toronto are treated as possible one-off freak events, the average insurance losses come to $182 million in the 1990s, $198 million during the 2000s and $268 million over the past nine years, which is not a dramatic shift considering there are many other explanations for insurance losses, including increasing individual wealth beyond mere per capita GDP values, urbanization, failure of governments to maintain decaying ancient water infrastructures, and the risks people take by moving into flood-prone areas.
The insurance industry has an obvious motive in highlighting flood risk. It is part of a concerted climate campaign by NGOs, governments and sustainable development advocates. As one executive put it at a 2016 conference the objective is to “monetize” the flood risk, an idea the IBC is pushing with the help of a relatively new “flood model” that identifies high-risk areas.
When risks are real, people should of course take steps to avoid them or get protection, including taking out insurance. But the industry seems to be heading in a questionable direction by promoting insurance for climate risks that may not exist and at the same time advocating for green protective infrastructure (see sidebar) that will cost more and may — if the engineers are right — increase the risk.