Canada will have to set aside more money to deal with natural disasters like wildfires, storms and floods as climate change starts to bite, the head of the country’s property insurance industry group said on Wednesday.
A wildfire sweeping through the heavily forested oil sands region of Alberta near the town of Fort McMurray could eventually cost C$6 billion ($4.64 billion), according to one industry estimate.
Don Forgeron, chief executive of the Insurance Bureau of Canada, noted there are a range of estimates out there on how much insured damage the wildfire will do, from a low-end of “a couple billion dollars” to a high of C$9 billion.
“It will likely be somewhere in between but we really don’t know,” said following a speech in Ottawa.
Asked whether the wildfire would lift insurance premiums in Fort McMurray and other areas where the perceived risk is higher, Forgeron said it is “rare that one event will cause that kind of reaction.”
A special fund that the Canadian government runs to help provinces recover from disasters covers 90 percent of all eligible costs.
In his speech, Forgeron cited a February report by the parliamentary budget officer which said disasters linked to climate change would cost the government C$900 million a year over the next five years.
This amount is far in excess of what Ottawa has currently set aside to deal with such events, he said.
“That’s a problem. That means (money to pay for) damages beyond what the fund can cover will need to be found elsewhere, resulting either in cuts to other programs or an increase in the federal deficit,” he said in the speech.
“Climate change … has moved from future threat to present danger.”
The Insurance Bureau represents more than 90 per cent of all car, home and business insurers in Canada.
Forgeron said the world had entered a troubling new era in which natural disasters such as fires and floods were happening more frequently.
Ways to help mitigate the damage include taking steps to better identify risks and then manage them.
“This means limiting or ending the practice of building in areas deemed high risk by flood mapping and having a hard discussion about where to build in areas that are close to our boreal forests,” he said.
Building codes also need to be upgraded to make houses more resilient, he added.
($1 = 1.2923 Canadian dollars) (Additional reporting by Leah Schnurr; editing by Alistair Bell)
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