The Critical Role of Commercial Insurers in Canada's Climate Resilience and Infrastructure Protection

Fremont, CA: Canada is increasingly vulnerable to severe weather events—from catastrophic floods and wildfires to intense windstorms. These events threaten lives, disrupt supply chains, and inflict billions of dollars in damage on private and public infrastructure. In this, the commercial insurance sector has moved beyond its traditional role as a reactive payer of claims to become a proactive steward of climate resilience and infrastructure protection.

The Rising Cost of Risk: An Insurance Imperative

Climate change has transitioned from an abstract environmental concern to a central financial and operational challenge for Canadian insurers. The increasing frequency and intensity of catastrophic (CAT) events have driven insured losses to unprecedented levels, often surpassing $3 billion annually. This escalation is straining the industry in two critical areas: underwriting and investment. In terms of underwriting, traditional property insurance models are under significant pressure as climate-related perils—particularly water damage—have overtaken fire as the leading cause of losses. Insurers must therefore reassess pricing frameworks and risk models to maintain profitability and ensure coverage sustainability. On the investment front, insurers face the complex task of managing their portfolios against both physical risks, such as assets located in high-risk zones, and transition risks, stemming from regulatory changes and the shift toward a low-carbon economy. For commercial insurers, addressing these evolving challenges is not merely an environmental obligation but a business imperative, necessary to ensure continued access to affordable insurance products for businesses and infrastructure projects across Canada.

Key Roles in Driving Climate Resilience

Commercial insurers are increasingly leveraging their expertise in risk assessment and capital management to advance climate resilience across Canada’s infrastructure and commercial sectors. A key focus lies in improving risk modeling and data transparency. By integrating advanced analytics, artificial intelligence, and spatial imaging into their operations, insurers can more accurately identify vulnerable assets, refine pricing to reflect risk levels, and share critical data with governments, urban planners, and engineers to guide resilient land-use and infrastructure planning. In addition, the industry is broadening its product offerings to encourage and finance adaptation. Innovative solutions such as sustainability-linked insurance provide financial incentives for policyholders who invest in resilience measures, such as storm-resistant building retrofits.

In contrast, parametric insurance offers rapid payouts based on predefined triggers—such as rainfall or wind speed thresholds—ensuring quick recovery for affected communities and businesses. Canadian insurers have also been at the forefront of expanding coverage by introducing overland flood insurance products, addressing a long-standing protection gap in a flood-prone nation. Beyond product innovation, insurers are key partners in protecting critical infrastructure through advocacy for stronger, harmonized building codes and through public-private collaborations, such as the National Flood Insurance Program, which combines private-sector expertise with public reinsurance to support high-risk households. As institutional investors, insurers play a crucial role in financing climate-resilient infrastructure, directing capital toward green bonds and other sustainable financial instruments that fund both engineered and nature-based solutions, including wetland restoration to mitigate flooding.

The Canadian commercial insurance industry stands at a pivotal crossroads as it seeks to reinforce its role as a cornerstone of national climate resilience. By aligning their financial strength and risk management expertise with national adaptation goals, commercial insurers can solidify their role as essential partners in securing Canada’s long-term climate resilience and safeguarding its vital infrastructure.