Climate change: How does it impact your commercial insurance?

De gros nuages dans le ciel

Heavy rainfall. Ice storms. Forest fires. Floods. You’re not imagining things: Climate change is real. If your company has been spared so far, you’re lucky. But the volatile weather has an impact on all of insurance, which means it affects everyone!

Is climate change real?

You bet! It’s real and here are a few figures to prove it.

Over the last 10 years, the cost of indemnifying damage caused by weather events has risen to an average of one  billion dollars per year in Canada.

However, this figure jumped to $2.2 billion per year from 2015 to 2019. A record high of $5.36 billion in catastrophic event claims was reached in 2016.

These are signs that fast-developing climate change is not a figment of our imagination.

Yes, but my commercial insurance has me covered.

That’s right: Your commercial insurance protects you against most natural disasters, which are also referred to as “acts of God.”

If you’re looking for that expression in our contracts, however, don’t bother! We’re more specific and list the situations against which your company is covered in the event of extreme weather.

The standard contract covers the following events:

  • Hail and freezing rain
  • Heavy rainfall
  • Snow storms
  • Gale-force winds
  • Forest fires
  • Sewer backups
  • Water seepage

Other situations can be insured, but you need to add additional coverage to your insurance contract for:

  • Floods
  • Earthquakes

The consequences for your company

Climate change represents a real, measurable risk for companies. And the risk is not only financial.

Some industries, including the insurance industry, are more vulnerable than others, especially those based on natural resources such as:

  • Forestry
  • Agriculture
  • Fishing
  • Tourism
  • Mining
  • etc.

Beneva doesn’t even cover companies in these industries.

The impacts of weather gone wild are numerous:

  • Supply chain issues
  • Evacuation
  • Relocation
  • Higher material and labour repair costs
  • Business interruption, with a slower return to normal

The more a company is agile, the better it succeeds in navigating weather events.

Insurance rates are increasing

When it’s time to set your commercial insurance rate, your insurance company takes into account the following factors:

  • The value of the building and property
  • Fire and water damage risks
  • Type of business
  • Claims history
  • Deductible amount
  • Credit rating
  • Prevention measures your company has in place to reduce risk
  • Salaries in the construction industry
  • Increased cost of construction materials
  • Any other factor that influences the insured risk

Over time, the most frequent and intense weather events caused by climate change will be integrated into the methods used to calculate insurance rates.

Yes, the cost of your commercial insurance is customized to your reality. But your insurance company pools the money of all its clients to create a fund, which is used to indemnify companies that experience damage. This is the principle of strength in unity.

Increased prevention measures

Don’t leave the efforts to counteract climate change entirely to your commercial insurance.

You also have an important role to play in limiting damage.

That’s where prevention comes in. It can make all the difference. Your insurance company, your municipality and other levels of government have extensive prevention advice to help you take on the many challenges of global warming.

More complex claims

When you file a claim after a natural disaster, your insurance company wants to know the exact cause of the disaster.

The determining factor is the unforeseen nature of the catastrophe.

The contract has to be checked to find out if your company is covered for the risk.

What’s becoming clear about this type of claim is the complexity. Increasingly, insurance companies are requiring more stringent analyses of claims to establish the real cause of the damage to a company.

Financial aid for companies who experience damage

Commercial insurance is a must for meeting the needs of your company! But in some cases, the Quebec government also provides disaster-related financial support (This hyperlink will open in a new tab).

Apply for this support, especially if the event is not covered by your insurance company.

There are certain eligibility requirements your company must meet to receive this aid.

When in doubt

The best way to find out what’s covered and what’s not covered by your insurance company is to review the provisions of your commercial insurance contract with it.