The Insurance Brokers Association of Canada (IBAC) has welcomed measures in the federal government’s Budget 2025 aimed at protecting Canadians and maintaining financial system stability in the event of a major earthquake.
The Budget includes a commitment to work with the insurance industry to address the growing risk of earthquake losses, particularly in regions such as British Columbia and the Ottawa-Montreal-Quebec City corridor, where earthquake insurance is becoming less available and more costly.
Budget 2025 specifically signals the government’s intent to consult with Canada’s property and casualty (P&C) insurance industry to develop mechanisms that would ensure the stability of the financial sector and the broader economy if an extreme earthquake were to occur.
This initiative responds to long-standing calls from the industry for a government-backed financial backstop for earthquake insurance, a measure that is currently absent in Canada but present in other G7 countries.
According to the Insurance Bureau of Canada (IBC), modelling indicates that a major earthquake off the coast of British Columbia could result in nearly $100 billion in total economic losses. In Quebec, a smaller earthquake could still produce losses in the tens of billions of dollars. The IBC has stated that the economic and social repercussions of such events would be felt nationwide, with the potential to disrupt the entire Canadian economy.
IBAC CEO Peter Braid (pictured above) said, “A major earthquake isn’t hypothetical. We have been raising the alarm on earthquake risk and the potentially devastating impacts, not only on people in affected regions, but on all Canadians.”
Braid added that IBAC looks forward to participating in the government’s consultations and providing the perspective of brokers who understand the challenges of earthquake insurance in their communities.
Recent industry analysis has highlighted the scale of the challenge. According to a report from insurtech firm MyChoice, Canada has experienced more than 300 moderate to major earthquakes since 1986, yet insurance coverage for seismic damage remains limited.
Fewer than half of homeowners in British Columbia carry earthquake insurance, and only about 7% of homeowners in Quebec are covered.
Liam McGuinty, vice president, federal affairs at IBC, commented that the government’s move to consult with the industry is a welcome development for the P&C sector and for Canadians. He said, “IBC is eager to partner with the government to quickly find a solution that will protect Canadians in the aftermath of a catastrophic earthquake and address the risks associated with a seismic event to the Canadian economy.”
The IBC has estimated that a major earthquake near Vancouver could result in nearly $96 billion in total economic losses, with only $26 billion of that insured. In Quebec, a severe earthquake could generate $61 billion in damage, but just $12 billion would be covered by insurance.
The Budget also announced the deferral of the statutory review of the Bank Act until 2033, extending consumer protection provisions for the foreseeable future. IBAC noted that provisions in the Bank Act ensure the separation of banking and insurance, protecting consumers from high-pressure sales tactics and supporting competition and ethical business practices.
IBAC stated it will continue to monitor any potential amendments to the Bank Act outside of the statutory review process and will advocate for the continued separation of banking and insurance to maintain a competitive and consumer-focused market.
