Climate change: what impact does it have on your commercial insurance

More frequent claims...and a lot more costly

All it takes is a look at the numbers to understand the scale of the problem: 

• For over 10 years now, extreme weather events have caused an average of $1 billion in damages per year in Canada.
• Between 2015 and 2019, this annual average rose to $2.2 billion.
• In 2016, the peak reached $5.36 billion.

Catastrophic claims are not only more frequent but also more severe and more costly. Since insurers cannot absorb all the costs alone, they must adjust premiums accordingly.

Your commercial insurance covers you, but…

Most commercial insurance contracts already cover many natural events:

• Hail and freezing rain
• Snow storms
• Gale-force winds
• Forest fires

If you add specific protection, it can also cover:

• Floods
• Earthquakes
• Sewer backups

Real consequences for your business

Severe weather is not just about torn off roof tiles or damaged walls. The impact goes far beyond the building itself.
Here is what many businesses are already experiencing:

• Slowdowns or complete shutdown of operations 
• Prolonged recovery times
• Temporary evacuation and relocation 
• Significant property damage 
• Higher repair and restoration costs
• Disruptions in supply chains
• Loss of income

Businesses that prepare for these risks and integrate prevention into their strategy will be better equipped to face climate challenges.

Higher premiums

Your commercial insurance premium is based on several criteria, including: 

• Value of insured buildings and equipment
• Type of business and industry sector
• Claims history 
• Deductible
• Preventive measures in place to reduce risks 
• Cost of labour and building materials 

So your premium is personalized. However, part of the amounts paid is pooled into a collective fund used to compensate businesses that suffer a loss. That is the very principle of insurance: one for all and all for one. 

More prevention

Commercial insurance is there to help you get through difficult times, but it’s not your only line of defence. Your business has a role to play in prevention to limit damages. 

Here are some examples: 

• Preventive maintenance and inspections of your building
• Installation of backflow valves
• An up-to-date continuity plan

Your insurer, your municipality and governments also share tools and advice to support prevention.  

Claims: a more complicated process

Claims related to climate events require more in-depth analysis because the stakes are higher. Before paying compensation, your insurer will look to:

• Identify the exact cause of the loss
• Confirm that the risk is covered under your policy
• Establish that the event was unforeseeable

Demonstrate that the weather conditions directly caused the damages

Financial assistance in case of loss

Insurance tailored to your needs is an essential safety net. Also note that the Quebec government offers assistance programs for businesses and owners of rental buildings that meet certain conditions. 
Apply for them, especially if your business suffers a loss that is not covered. 

A closer look at your coverage

Climate change is here to stay, bringing with it more frequent and less predictable risks.
It’s better to integrate these into your daily management now. To better protect your business, focus on prevention and contact your broker to review your commercial insurance. With increasingly unpredictable weather, you need to know exactly how far your coverage goes.