British Columbia's newly released Disaster and Climate Risk Resilience Assessment (DCRRA) report underscored the significant challenges a major earthquake would pose to the province's property and casualty (P&C) insurance sector.
The report found that 92% of British Columbia's population and 90% of businesses are exposed to seismic risk. A magnitude-9 earthquake could result in $128 billion in economic losses, have economic growth and lead to 43,700 job losses over the next decade.
For insurers, the scale of potential claims would stretch capacity beyond typical market limits, highlighting a critical gap in coverage preparedness.
Need for federal support
Insurance Bureau Canada has repeatedly advocated for a government-backed mechanism to support recovery after catastrophic earthquakes. Such a framework would allow insurers to manage claims more effectively while providing stability to policyholders and the broader economy. Canada remains the only G7 country with significant earthquake risk that lacks this type of public-private partnership.
Canada’s P&C insurers are among the most well-capitalized globally, yet even top-tier carriers would face extraordinary strain in covering losses from a catastrophic earthquake.
The report reinforces long-standing industry concerns that a major event could trigger systemic financial risk, impacting both policyholders and insurers. Insurers must anticipate high claim volumes across personal, commercial, and specialty lines, particularly in regions with concentrated exposure.
Emerging tools for risk assessment
The DCRRA introduced a Hazard Insights Tool with an interactive map that allows insurers, risk managers, and planners to better understand regional and provincial exposure. The tool can inform underwriting, pricing, and reinsurance strategies, helping carriers manage risk more proactively and design products that reflect local vulnerabilities.
With ongoing population growth and construction activity in B.C., potential losses are likely higher than previous estimates. Insurers and regulators must consider adaptive strategies, including risk-based pricing, reinsurance solutions, and potential federal programs, to ensure market stability and resilience in the event of a catastrophic earthquake.
