In insurance, a catastrophic event is one that is typically unpredictable and causes extreme loss. Catastrophic events can be either natural or man-made disasters, and common examples include earthquakes, floods, hurricanes, wildfires, and terrorist attacks.
According to a review conducted by Property Claim Services (PCS), insured losses from catastrophic events in Canada reached about $4.9 billion last year, which is nearly 10 times more severe than 2015.
When these events occur, they have a heavy impact on the market - often driving up premiums.
The report - "More than 50 Cats: PCS Full-Year 2016 Catastrophe Review" - also found that, over the past five years, the average insured loss from a catastrophic event was $2.1 billion. During this time frame, the two largest events on record in Canada were the 2014 Alberta floods ($1.7 billion) and last year's Fort McMurray wildfires ($4 billion).
Six of the 2016 catastrophic events that occurred in Canada were in the "wind and thunderstorm" family and resulted in industry losses of nearly $860 million.
Furthermore, the report noted that the increase in catastrophic events had an impact on reported personal losses. In 2015, a quiet year for catastrophic losses, personal losses accounted for only 45 per cent of the insured loss estimate. In 2016, personal losses accounted for 71 per cent of the insured loss estimate.
Moving forward, there is a possibility that major, catastrophic events will increase in frequency and severity, making it all the more important for insurers and businesses to stay ahead of the game. In 2017, many insurance companies will be looking to advance their tools and share best practices for assessing and responding to catastrophic disasters, whether natural or man-made.
For more information on the market forces impacting insurance premiums contact our Commercial Insurance team today.