Those of us living in Ontario this summer have had a tough time finding evidence of global warming.  But the weather is unusual in much of North America – the result of some form of climate change.

And the changing climate is causing more damage because of something as simple as changes in rainfall.

Let’s put this into context with a brief history lesson: the Great Fire of London (1666) devoured over 13,000 homes, and the first property insurance company was formed in the UK a few years later.  (The first wholly-Canadian insurance organization was founded much later in 1887 under the leadership of former Canadian Prime Minister Sir John A. Macdonald.)

For much of the 300+ years that property owners have bought insurance to protect their investment, fire, smoke and explosion were the only perils against which coverage was provided.  Through the 20^th century, additional perils were added including theft, vandalism and water damage; but fire was always feared as that which inflicted the most dramatic damage.

Fire continues to be the cause of most total losses (destruction of the entire building).  However, here’s what has changed so far in the 21^st century: most property insurers in Canada incur greater losses (both by frequency and total dollars) from water damage than from fire.  In fact, to date in 2009, many Ontario insurers have paid more on damage caused by water than from all other perils combined.

This is due to a number of factors: climate change, aging municipal storm sewage infrastructure, and the desire to eradicate any mould-causing moisture are all components of the problem.

But the reality is that insurers are measuring exposure to water damage with the attention that was once reserved for calibrating exposure to fire.  This is emerging as a “front-burner” issue, and will inevitably be reflected in underwriting and pricing in the months to come.

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This entry was posted on Tuesday, August 11th, 2009 at 1:57 pm and is filed under Property. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.