As climate-driven disasters intensify across Canada, businesses are facing a growing risk that many did not anticipate until it was too late: underinsurance.
A recent wildfire in Jasper, Alta., has spotlighted the issue, revealing how inadequate insurance coverage left numerous small businesses financially vulnerable. According to the Insurance Bureau of Canada (IBC), many firms in the area were insured below their replacement value and had only 12 months of business interruption coverage – a duration often too short to recover fully after a catastrophic event.
“The Jasper fire isn’t an outlier. It’s a warning,” wrote Cecilia Omole, manager of commercial policy at IBC, and Rob de Pruis, national director of consumer and industry relations at IBC.
In 2024, insured losses from extreme weather events, including the Jasper wildfire, Calgary hailstorms, Ontario flooding, and Hurricane Debby’s remnants in Quebec, reached a record $9.2 billion. Estimates for the first half of 2025 suggest insured losses have already surpassed $1 billion.
Many businesses, already strained by inflation, labour shortages, and unstable supply chains, are making difficult budgetary decisions. Insurance is often viewed as an expendable cost, despite being vital for recovery and growth. “Here’s the paradox,” Omole and de Pruis said. “The same factors that may be prompting businesses to reduce coverage… are the very reasons why they need more robust coverage.”
A key concern lies in the standard business interruption coverage, which typically lasts 12 months. IBC warns that reconstruction often takes much longer – up to 36 months in some cases – due to high construction costs, labour shortages, and permit delays. When coverage ends prematurely, businesses may be left without financial support.
The IBC urges business owners to act now while Canada’s commercial insurance market remains competitive. According to insurance broker Marsh, rates fell by an average of 3% in Q1 2025, providing an opportunity to revisit policies.
IBC recommends businesses take several steps: update property valuations, explore extended interruption coverage, understand co-insurance clauses, and make insurance part of annual business planning. A business continuity plan and regular consultations with insurance professionals are also advised.
“In today’s world, underinsurance is a bigger risk than many business owners realize,” the IBC warned. “No one expects a disaster. But when disaster strikes, the time to check your coverage is already behind you.”
What are your thoughts on the IBC’s warnings about underinsurance? Share your insights in the comments below.
