Insurance for a better world

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Maryam Golnaraghi, Director Climate Change and Emerging Environmental Topics, recently spoke with Sarah Lawrynuik of the Canadian Broadcasting Corporation (CBC) about insurance responses to extreme weather events:

Sarah Lawrynuik (SL): Good morning. So after an Ottawa couple separated recently, they decided to sell their home and move into their own condos. But just one problem: their insurance company denied them coverage citing the recent declaration of a state of emergency in the city. In years past we've heard about other insurance headaches that have been caused by things like the Fort McMurray Wildfire in 2016.

So with the risk of extreme weather events mounting as climate change impacts are felt, how are insurance companies responding? Maryam Golnaraghi is here to dive into this topic. She is the Director of Extreme Events and Climate Risk for The Geneva Association, an international think tank looking at insurance and risk management. Good morning.

Maryam Golnaraghi (MG): Good morning. Happy to be here.

SL: So let's start small before we talk big picture. How is the mounting risk of natural disasters going to impact individuals?

MG: Individuals and homeowners will need to re-think how they would recover should their home be flooded or experience stress from a natural disaster. But it remains a challenge – particularly in high risk zones – because insurance is priced based on the level of the risk, and in some regions with high levels of risk it might not be affordable for homeowners. The insurance industry has approached the Canadian government as well as provincial and local authorities to embark on initiatives that will make insurance affordable.

SL: So is there likely to be more people who are denied coverage or will it just be a question of how expensive it is?

MG: This is not about denying coverage at all. It's about making coverage available and making Canada – all the way to the level of homeowner – financially resilience in regions where we know homes are being flooded year after year, and insurance is not going to solve the problem. This is where, by working with the local and provincial governments, there are now solutions around making these communities more flood resilient, by investing in flood protection, through improving storm and flood management systems in that community, or – if the risk remains very high – even creating pay out programs to move the highest risk residents away from the high-risk zones. The insurance industry is now rising to the task of providing insurance solutions that incentivize people and the policy holders to change behavior. So for example, incentives to make your home flood resilient: if you take certain actions, you will get a lower premium for your insurance policies.

SL: And when you look at events like the Fort McMurray Wildfire, it cost insurers 3.6 billion dollars. So how exactly are insurance companies, you know, going to keep going when those are the kinds of payouts that they're looking at when these natural disasters strike?

MG: I think the way forward is a collaborative effort. Dealing with financial protection of extreme events in Canada is not a single sector problem. It's an all-of-society problem, and everybody needs to understand the risk and take measures to reduce them. The fact that investing pre-disaster is a lot cheaper than spending post disaster – we can come up with the best financial solution, but if we don't have policies around making resilience a precondition for any infrastructure development or making sure that the government, particularly at the local level, is not allowing permits in the high risk zones, nothing can happen. Already our financial numbers are showing that paying for these disasters is going far beyond our budget, and we need to really start thinking about different solutions. The status quo is not working.

SL: So I think I'll leave it there. That's a good place to stop. Thank you so much for your time.

MG: Absolutely a pleasure. Thank you so much, Sarah. Have a wonderful day.

SL: That's Maryam Golnaraghi. She's the Director of Extreme Events and Climate Risk for the Geneva Association.