Facing up to climate loss and damage
The international community agreed at COP27 to set up a global loss and damage fund. But Canada also needs to develop its own national climate insurance program.
At COP27, the world reached a historic agreement to create a fund to compensate vulnerable nations suffering from climate-induced disasters. This was a long time coming, no small feat and something Canada played a crucial role in making happen.
Ultimately, it will see developed countries like Canada, among the world's largest greenhouse gas emitters, help developing countries, who have contributed little to the climate crisis, bear the immediate costs of climate-fuelled events such as storms and floods.
But even though loss and damage took centre stage at COP27, legal experts say it has yet to make it on the domestic agenda.
"We're not paying any attention to it at any level," says Temitope Onifade, a researcher with the Canada Climate Law Initiative and an instructor in climate law, policy, and justice at UBC's Peter A. Allard School of Law.
"It's always been seen as an issue for small island and developing nations that have lost land and property to climate disasters. We've thought that it's not our business. But now we're starting to see it happen domestically."
While climate adaptation is primarily about preparing for impacts that are likely to occur, loss and damage relate to impacts that have already taken place and how to deal with them. Specifically, how to pay for them.
This year alone, Canada has experienced its most costly hurricane and windstorm, and in recent years, its most costly wildfires and floods. As these weather events become more frequent and intense, the resulting costs will be a big issue, Onifade says.
Right now, the primary mechanism used for loss and damage is insurance, whether it involves personal property or public infrastructure. But insurers are adjusting their models to prepare for the anticipated losses and damage to protect their business.
"Insurers want to make money," Onifade says. "As the risks increase, they will be withdrawing insurance opportunities. In fact, it's already happening."
Just ask those in Atlantic Canada who had their homes and property damaged or destroyed by Hurricane Fiona, which brought record-breaking storm surge – something insurance does not cover. That's because around 2005, water surpassed fire as the number one area for insurance payouts as municipalities continued to permit people to live and build on flood plains. At that point, insurers started excluding all types of overland flooding from their policies.
Paul Kovacs, the founder and executive director of the Institute for Catastrophic Loss Reduction at Western University, doesn't see a threat to the availability of insurance over the next five, 10 or 25 years. But the status quo isn't necessarily sustainable either, given that the payments made by insurance companies because of climate extremes have doubled every five to 10 years over the last four decades. Currently, the industry pays out $2 billion a year in Canada in catastrophic loss claims. The research his institute has done has found that those payments were for things that essentially could have been prevented.
"Insurance is critical and a really important mechanism that pays the cost associated with failing to adapt," Kovacs says. "If you've adapted, you don't have the loss and you don't have the damage."
For example, in Atlantic Canada that means modifying existing homes and ensuring new construction includes wind resilience that can withstand a category three or four hurricane. Twenty-five years ago, Florida changed its building regulations so that new construction would prepare for the kind of hurricanes that hit there, Kovacs says. While Hurricane Ian brought record damage this fall, it was primarily to homes built before those regulations were changed.
He says the insurance industry has a vital role in driving adaptation through incentives, disincentives and signals that encourage people to make the necessary changes to protect their homes and property against climate threats.
But it shouldn't be the responsibility of individuals to seek out people like him to tell them how to become resilient. Kovacs says governments need to take a proactive role in informing people about what they need to do to avoid damage in the future. And there should be financial incentives to doing so, as well as assistance for those who don't have the resources.
Ultimately it will cost governments less to help people prepare for climate disasters rather than having to foot the whole bill once they happen, he says. If homes in Atlantic Canada had been designed to withstand what Fiona brought ashore this fall, the repair and recovery costs governments now have to pay would be significantly lower.
"It's not like we don't know what to do," Kovacs says. "The science knows how to prevent the loss and damage. We just need to commit to applying that to our existing homes and to new construction. We can do better."
Craig Stewart, the Insurance Bureau of Canada's vice president of federal affairs, agrees that better preparation is fundamental. As the coordinator of Climate Proof Canada, a coalition of non-governmental, Indigenous, environmental, research and private-sector organizations, as well as municipal governments, he was among those who urged the federal government to build a more disaster-resilient country by being clear about how many homes will be protected from flooding by 2028, how many communities are going to develop wildfire plans or how we’re going to reduce hospitalizations for extreme heat.
"We can't only be focusing on recovery and financial recovery, so investments in reducing risks are key. That's why we pushed so hard for targets tied to risk reduction to be in the national adaptation strategy."
The strategy and action plan were released on November 24. They set out long-term term transformational goals, as well as medium-term objectives in five key systems that affect the daily lives of Canadians: disaster resilience; health and wellbeing; nature and biodiversity; infrastructure; and economy and workers.
Stewart called its use of clear risk-reduction goals and outcome-based targets “truly world-leading.” By focusing on climate defences in the near-term, he said the proposed investments “will be a welcome down payment on the actions needed to deliver on these targets.”
Like Kovacs, he also thinks insurers should step up and play more of a role. Currently, loss and damage are handled by private sector insurance and government disaster financial assistance programs, and he says the two programs should be better coordinated. What's needed is a new public-private partnership in the form of a national climate insurance program that's designed to minimize the exposure of taxpayers while protecting everybody that's exposed to high-risk situations across the country.
"That's the discussion that insurers are having with governments right now," Stewart says, noting it will start with a national flood insurance program and then expand to other climate-driven perils. He expects a program to be announced by the federal government at some point next spring.
Beyond extreme weather events, however, there is slow onset loss and damage to consider, such as melting sea ice in the north. While that can bring economic loss by way of lost livelihoods, there are also non-economic impacts, including the loss of Indigenous culture and traditional way of life.
"You can't really turn to an insurance company for something like that," says Sara Seck, associate professor at Dalhousie's Schulich School of Law, and a member of the Canada Climate Law Initiative.
That's why people are turning to the courts. There's been an explosion of climate litigation globally in recent years, mostly focused on mitigation, but increasingly it's adopting a human rights lens. In September, the United Nations Human Rights Committee found that Australia violated the Indigenous Torres Strait Islanders' rights by failing to adequately protect them from the impacts of climate change. Specifically, the climate-driven loss of metres worth of land, coconut trees, fish and birds violated their rights to enjoy their culture and be free from arbitrary interferences with their private life, family and home.
The committee said the government's failure to take climate action violated human rights set out in the International Covenant on Civil and Political Rights (1966) – a treaty Canada has also ratified
Meanwhile, the low-lying island state of Vanuatu is seeking a resolution from the International Court of Justice to clarify governments' obligations to protect their populations and others. Its campaign now has the support of at least 86 countries.
While this sort of litigation hasn't trickled down to the Canadian context, it's just a matter of time. As for who pays for the harm, Seck says that will require making the link between the polluter pays principle and remedying the harm. But in Canada we tend not to make the causal connection between high emissions and damage.
"We need to reduce emissions because emissions cause harm," she says. "But if we're pricing emissions and pricing carbon, we need to think about also compensating those who have been harmed, whether it's slow onset or extreme weather."
While it's important to discourage people from building in vulnerable areas, in low-lying fishing communities, including Port aux Basques, which was ravaged by Fiona's storm surge, people have been there for generations.
"It can't be a 'it's your fault that you've got your house in that place' mentality," Seck says. "If it's uninsurable, it's not their fault. It's uninsurable because climate change has changed what the status is, and that's because of emissions. So can we talk about emitters actually compensating them?"