$8.5B Weather Damage Drives House Insurance Rates Up in Canada

The expense of disasters caused by weather is increasing year after year, and 2025 will not likely be any different. Insurers used to pay an average of $400 million annually for catastrophic weather events between 1983 and 2008, but since 2009, the average has risen to nearly $2 billion per year. Canadian homeowners should prepare for significant changes in their home insurance rates for 2025.

This has been the most severe year of damages caused by weather-related incidents for us here in Canada. In 2024, insured damages from weather events reached a staggering $8.55 billion. These losses were almost three times higher than in 2023 and twelve times higher than the average yearly amount over the past decade.

Some regions might become impossible to insure because weather disasters keep getting worse and more frequent. 

Record Weather Losses Impact Insurance Market

Breaking down the $8.5B damage total

A devastating hailstorm hit Calgary on August 5, becoming the most destructive event recorded so far for 2024. It caused $4.18 billion in damages in just one hour. The Jasper wildfire in late July brought $1.53 billion in losses. Hurricane Debby’s remnants flooded Quebec and caused $3.76 billion in damages. The Greater Toronto Area suffered severe floods in July, resulting in $1.37 billion in insured losses.

Historical context and trends

Insurance companies paid $557.34 million yearly for catastrophic claims between 1983 and 2008. This number has jumped to almost $2.79 billion per year since 2009. Recent years show a clear pattern – 2020, 2021, 2022, and 2023 rank among the top 10 worst years for weather-related insurance losses. 

The Insurance Bureau of Canada has tracked a steep rise in claims since 2019. Canadian insurers face growing challenges as the country’s personal property damage claims have jumped by 115%, while repair costs have shot up by 485%. 

Climate change is significantly impacting weather patterns, leading to more extreme events and higher insurance payouts for insurers,” explains Steven Harris, licensed insurance broker expert. “These increased costs are reflected in rising premiums for homeowners.

Rising Home Insurance Rates

Factors other than weather driving premium increases

Canadian house insurance rates continue to climb due to several factors beyond severe weather events. Home replacement costs have jumped by 23% since January 2019, and residential construction costs have shot up by 61% during the same period. 

One reason insurance costs keep rising is worker shortages. BuildForce Canada expects a shortage of 85,500 construction workers in the next decade. This worker deficit leads to longer repair times and higher claims costs. The construction industry’s workforce will shrink as 25,000 to 28,000 workers retire yearly until 2033. These retirements put extra pressure on repair schedules and costs.

Regional rate variations

 Homeowners in Saskatchewan and Manitoba are seeing the biggest jumps in rates, while increases in British Columbia and Quebec are more modest. Saskatchewan leads with the highest jump at 12.16%, while Manitoba follows at 11.31%. Alberta’s homeowners face a 9.25% increase due to severe weather risks. British Columbia and Quebec see moderate rises of 7.63% and 8.02% respectively.

The ripple effects of home insurance price increases will be felt unevenly across Canada, with certain provinces bracing for more substantial impacts,” according to data from rate comparison site My Choice Financial.

Insurance company responses

Insurance companies may be starting to change how they evaluate risks. Global reinsurers have cut their capacity and raised costs in high-risk areas. 

In Canada, 1 out of every 10 households faces a significant risk of flooding. Flooding is the most prevalent weather-related disaster in Canada.

Last year, approximately 1.5 million households, accounting for 10% of all households in Canada, were highly vulnerable to flooding. To address the issue of rising insurance premiums, the federal government has allocated $44.17 million for the national flood insurance program. This program aims to safeguard homeowners, particularly in situations where obtaining insurance becomes more challenging due to climate-related risks.

As many insurance companies now offer coverage for overland water, some insurers are making the decision to modify their Personal Property product. For instance, one insurer has already introduced a mandatory minimum deductible of $2,500 for water damage for all property risks. This new minimum deductible will apply to any loss caused by water, including losses related to Overland Water damage. This includes leaks from interior plumbing fittings or appliances or covered losses under the Sewer Back-Up Endorsement unless the deductible for that specific risk is higher. It would not be unexpected to witness other insurers adopting similar measures in the future.

Future projections and modelling

Climate-related claims could reach $6.97 billion yearly in the next decade – double the current amount. Insurance companies will need 10-20% more claims adjusters in the next five years to handle this growing workload.

Insurance companies are now limiting their coverage in high-risk zones but may also make additional changes to their product offerings in general. For example, homeowners may need to deal with higher deductible options and tougher coverage requirements. 

According to the Fitch Ratings Report, home insurance companies are currently encountering ongoing difficulties in estimating loss expenses and providing coverage that aligns with the property’s value, given the backdrop of higher inflation and economic uncertainty. In 2023, insurers experienced an underwriting loss for the sixth time in seven years, primarily due to an increase in claims from natural catastrophes that surpassed historical averages. Fitch predicts a decline in the homeowners’ statutory underwriting performance, with a projected segment combined ratio of 109% in 2023 compared to 104.4% in 2022.

Homeowner Protection Strategies

Policy price optimization methods

Insurance companies give you many ways to lower your premiums through risk mitigation measures. You may be able to get discounts by installing security measures like monitored alarm systems and fire safety features. A good credit score in eligible province insurers also helps you qualify for better rates.

Damage prevention measures

Check your attic regularly for water damage and clear drainage systems and gutters to prevent claims that can get pricey. You should also secure outdoor furniture before storms hit and trim tree branches away from your house to reduce wind damage risks.

The Institute for Catastrophic Loss Reduction shows that each dollar invested in wind protection results in $8.36 of avoided damage. Budget-friendly protective measures include installing a sump pump with backup power, proper landscaping, and adequate insulation. Houses in flood-prone areas need elevated critical systems and backflow valves for essential protection.

Looking Ahead: Insurance in a Changing Climate

Canadian homeowners are facing a new reality in insurance after 2024’s record-breaking weather damage. These massive losses have pushed insurance premiums higher across provinces, and some regions can’t even get coverage anymore.

Your property’s protection is the best way to fight rising costs. Smart home upgrades, regular maintenance, and the right coverage choices can help you manage these increasing premiums.

Weather-related claims could double in the next decade, according to climate forecasts. Homeowners need to take action now, especially in high-risk areas. A combination of good insurance coverage and preventive home maintenance will give you the best protection against future weather risks.

FAQs

How much did weather-related damage cost Canada in 2024? In 2024, Canada experienced a record-breaking $8.5 billion in insured losses due to severe weather events, nearly triple the losses from the previous year and 12 times the annual average from the past decade.

Why are home insurance rates increasing in Canada? Home insurance rates are rising due to several factors, including record weather-related damages, increased construction and repair costs, labour shortages in the construction industry, and higher home replacement costs.

Which regions in Canada are most affected by rising insurance rates? Saskatchewan and Manitoba are experiencing the highest increases, with Saskatchewan seeing a 12.16% rise and Manitoba experiencing an 11.31% increase. 

What can homeowners do to protect themselves from rising insurance costs? Homeowners can take several steps to manage insurance costs, including regular property maintenance, installing security measures, maintaining a good credit score, and implementing damage prevention measures like proper drainage systems and wind protection.

How is climate change impacting the insurance industry in Canada? Climate change is causing more frequent and severe weather events, leading to increased insurance claims and payouts. This has made some areas difficult to insure, and projections suggest weather-related claims could double within the next decade, potentially reaching $6.97 billion annually.

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