By Cindy White
CALGARY (660 NEWS) – What would happen to insurance companies if Canada is hit by a major catastrophe?
While the Calgary floods of 2013 and the Fort McMurray wildfire hit insurance companies hard, a report from the University of Calgary warns larger disasters could lead to the financial collapse of the industry.
Risk Management Professor Anne Klefner said when you have a multi-billion dollar event, it could see some firms crumble.
“For any insurer that becomes insolvent, the rest of the insurance industry then is assessed in order to pay the liabilities of the now insolvent insurers. It’s that which ultimately creates this domino effect.”
Flefner believes as many as 18 insurance companies could go bankrupt following major disasters, leaving property owners in the lurch or governments having to pick up the tab for recovery.
The Insurance Bureau of Canada estimates about $3.7 billion in insured damages came from the Fort McMurray fires, making it the costliest disaster in Canadian history.
The southern Alberta floods cost insurance companies $1.6 billion.
In 2017, the IBC said losses due to natural disasters have increased dramatically over the last ten years.
Klefner said an earthquake in places like Vancouver or Montreal, could cause $35 billion in damages.
“We’re talking about events much, much larger than what we’ve seen to date. Much bigger than Fort McMurray, for example. The idea is there is limited capacity, so although it’s high, it’s not unlimited.”
Canada is the only G7 nation that doesn’t have a federal government plan to help the insurance industry as a whole deal with mega catastrophes.