Reluctant insurers creating earthquake gap in Quebec

Published: February 6, 2018

Updated: July 24, 2018

Author: Luke Jones

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Home and tenant insurance customers in Quebec are at an increasingly risk of earthquake, but insurance companies are not rushing to deliver earthquake coverage to the province. An industry expert spoke at the C4 2018 Conference in Ottawa on Friday and said there is too much risk already so insurers are avoiding adding more.

“To be candid, since 2009, the insurance industry has faced a remarkable decade of nat cat losses in this country, and the insurance industry has considerable exposure given the uptake [of earthquake coverage] in British Columbia, so I’m not sure companies are falling all over themselves to increase exposure in Quebec at this time,” said Craig Stewart, vice president of federal affairs at the Insurance Bureau of Canada (IBC). “Certain companies are promoting it, but I don’t think there is an overt campaign at this point.

“That’s part of the issue: What can we bear? What do we want to take on as an industry?”

Eastern Canada is subject to major seismic activity, especially through the Ottawa-Montreal corridor. Since 1663, five earthquakes of Magnitude 6.0 or more have happened along the Charlevoix seismic zone, which sits 100 km east of Quebec City. These major quakes are added to by around 450 seismic activities that occur in Easter Canada each year. Many of these people will not notice, but some cause noticeable damage.

Catastrophe researcher RMS believes Quebec is due a big one. Indeed, the firm says a 1-in-500-year earthquake would cause around $15 billion in residential and economic losses in the area, $18 billion in commercial and industrial losses. Such an event would dwarf the near $4 billion insurance bill for 2016’s Fort McMurray wildfire, currently Canada’s largest ever insurance loss.

Can Quebec afford a $33 billion bill? Because of this risk and the potential losses, insurance companies are avoiding delivering earthquake solutions to customers. Justin Moresco, senior product manager of RMS agrees there is an insurance gap:

“RMS estimates a 97 per cent gap on the residential side, and about a 60 per cent gap on the commercial and industrial side.

“This is a direct consequence of the low earthquake insurance take-up in Quebec. I think many Canadians realize that earthquakes occur in the east, but it’s safe to assume that very few appreciate just how much damage could be caused by a large earthquake.”