Insights | Business Insurance For Weather Related Risks
With every change of season comes a new weather-related risk. Extreme summer droughts lead to fall storm cells. Polar vortex cold and record-breaking snow create rivers of spring water runoff. It seems like every other day, meteorologists report on another extreme weather event that’s impacting the lives and livelihoods of Canadians.
Related Matters: CBC News: Matters: Record-breaking snowfall buries Toronto in white
No industry or business is immune to potential weather-related damage. This is because extreme weather takes many forms. And we’re seeing record-breaking weather more frequently. 2019 snowfall in Toronto has already broken a record set eight decades ago. CBC noted that February 27, 2019 was “officially the snowiest Feb. 27 in Toronto since 1938.”1
The 2018 overland flooding across southwestern Ontario, frost destruction of Niagara and Prince Edward County grape crops in 2015 and the devastating 2016 Fort McMurray wildfire are all recent Canadian examples. It doesn’t matter where you live, work, play or do business, weather related risks are a growing concern for every Canadian.
Weather related risks are happening in Canada and around the world
Oceans are warming and acidifying, glaciers are retreating, ice sheets are shrinking and Arctic sea ice is disappearing. All of these factors are contributing to climate change.
In fact, NASA documents more compelling evidence of rapid worldwide climate change such as:
- Rising temperatures.“…2016 [was] the warmest year on record [and] from January through September, with the exception of June were the warmest [months] on record.”2
- Rising sea levels.“Global sea level rose about 8 inches in the last century. The rate in the last two decades, however, is nearly double that of the last century and is accelerating slightly every year.”3
- More extreme weather events.“…record high temperature events in the United States has been increasing, while the number of record low temperature events has been decreasing, since 1950. The U.S. has also witnessed increasing numbers of intense rainfall events.”4
Canadian businesses can now buy insurance for weather related risks
Across the country, business owners are watching forecasts and preparing for weather related risks. Experts estimate that about 80 per cent of economic sectors are impacted by climate risks. Weather related risks can include devastating storms, heat waves, earthquakes, drought, excess rainfall and more.
Once extreme weather damages a business property, reporting your claim is just one small step in a lengthy recovery process. You’ll need to immediately contact employees, business partners and suppliers. Depending on how extreme the weather-related damage to your business is, you may need to bring in experts to activate crisis, disaster recovery as well as public relations plans.
Every single moment will cost your business time, energy and money. After an extreme weather event, everything be in short supply. And if your business’s response to an extreme weather event is viewed to be insufficient, slow or inappropriate by the general public, you may also have to worry about lasting reputational damage.
Now available across Canada | Extreme weather risk insurance
Parametric insurance is, essentially, weather risk insurance. It is coverage that is specifically designed to address claims related to extreme weather risk damage. AXA Global Parametrics, an insurance and reinsurance broking company incorporated in France, is now making parametric insurance available to Canadian businesses.
As Canadian commercial insurance brokers, we at ALIGNED are constantly seeking new coverage solutions for businesses. With extreme weather risks happening more frequently, new and innovative insurance products that respond to Canadian weather-related risks are on our radar. At ALIGNED Insurance, we are proud to deliver a better and different insurance experience to Canadian business.
What industries can buy insurance for weather related risks?
Businesses in many industries can benefit from parametric insurance. Here are a few examples provided by AXA Global Parametrics:
- “Agriculture – coverage against low yield due to drought, excess rainfall or cyclones
- Food & Drink – coverage against decreased sales of cold drinks during a cool, rainy summer
- Construction – coverage against work delay costs due to extreme cold temperatures
- Retail – coverage against drop in seasonal clothing sales (winter coats, bathing suits…) due to adverse weather
- Renewable Energy – coverage against a decrease in renewable energy production due to adverse weather (lack of wind or solar radiation)
- Gas & Energy – coverage against a decrease in energy demand due to a warm winter
- Tourism & Leisure – coverage against a drop-in visitor numbers and subsequent lower food and beverage sales in theme parks due to extreme weather conditions (excess rainfall, cyclones…)
- Transportation – coverage against increased costs for airline companies due to cold temperatures and snow (aircraft de-icing)”5
How does insurance for weather related risks work?
Existing and ongoing extreme weather risk research is used to establish probability parameters for parametric insurance. Known parameters are used to benchmark general norms for geographic areas. Parameters can include temperature, rainfall, windspeed, crop yield as well as earthquake magnitude.
Insight: An extreme weather risk situation generally means a change in temperature or rainfall amount that is either above or below a certain parameter.
AXA Global Parametrics has specifically designed parametrics insurance to measure extreme weather risk exposures. This coverage is designed to deliver when you need it most, after an extreme weather risk event damages your business property. Here’s how it works:
- When climate events are outside of certain levels, parametric insurance is specifically designed to expedite claims payments quickly and transparently.
- When a parameter is below or above a set, level, you will receive a claims payment within a few days for a pre-defined amount and threshold.6
Extreme weather risks are damaging businesses across Canada. Commercial business can get insurance for weather risks. Talk to an ALIGNED Insurance broker about extreme weather risks and ways to manage business risks. We can help you get insurance for extreme weather risks across Canada.
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Source(s): 1CBC News: Matters: Record-breaking snowfall buries Toronto in white; CBC News: Temperature plunge leaves Ontario vineyards scrambling to prevent crop damage;Global News: Canada’s extreme weather could be the new norm, governments should start preparing: experts; 2, 3, 4www.climate.nasa.gov; https://climate.nasa.gov/evidence/;Insurance Business Canada: “Lessons learned from the latest Canada flooding”;The Globe and Mail: “In wildfire-prone B.C. and California, urban sprawl and bad planning are fuelling future infernos. What can we do?”; 5,6 AXA Global Parametrics: Parametric Insurance – Innovation strengthening climate resilience