A shareholder advocacy group, Investors for Paris Compliance, has pointedly criticized Canada’s largest property and casualty insurers for their substantial investments in the fossil fuel industry. In a report released Wednesday, the group highlighted that these insurers collectively poured approximately $19.5 billion into oil and gas assets last year, with a significant portion managed by Toronto-Dominion Bank. Concurrently, several companies engaged in underwriting services for the fossil fuel sector.
Kiera Taylor, senior analyst at Investors for Paris Compliance, emphasized the contradiction within the property and casualty (P&C) insurance sector. She noted that while insurers face escalating risks from climate change, such as increased claims due to severe weather events like wildfires and floods, they continue to exacerbate these risks through their financial ties to fossil fuels.
Over the past decade leading up to 2023, home and mortgage insurance premiums surged by 73%, or 36% when adjusted for inflation, based on data from Statistics Canada. This rise correlates closely with the escalating frequency and severity of climate-related disasters and rising replacement costs.
“The P&C industry is really entrenched in a contradiction,” Taylor stated. “While their business faces an existential threat due to climate change via higher claims and growing uninsurability, they continue to foster those risks via underwriting and investing in fossil fuels.”
According to the report, catastrophic losses for P&C insurers averaged $2.3 billion annually between 2011 and 2020, a stark increase from $675 million per year in the preceding decade.
Taylor criticized the industry’s approach to addressing these challenges, noting that insurers have largely shifted responsibility onto consumers and taxpayers while advocating for government support like a national flood insurance program. She highlighted a perceived lack of substantive action from insurers to mitigate their own contributions to climate risks.
Responding to these criticisms, Brett Weltman, spokesman for the Insurance Bureau of Canada, disputed certain assertions in the report. He emphasized that insurers are navigating these issues independently within a competitive market, though he acknowledged industry efforts towards climate disclosure and energy transition initiatives.
The report recognized varying degrees of commitment among industry players towards climate goals. Companies such as Intact Financial Corp., Desjardins Group, Co-operators Group, Definity Insurance Co., and TD have made net-zero commitments and implemented fossil fuel exclusion policies, albeit with varying levels of stringency.
Intact Financial Corp., for instance, reported $1.5 billion in fossil fuel investments last year, a figure significantly reduced to $742 million by the first quarter of this year. The company has set interim targets towards reducing the emissions intensity of its investment portfolio.
Conversely, insurers like Wawanesa Mutual Insurance Co. and Fairfax Financial Holdings Ltd. have not made similar commitments, with Fairfax continuing to underwrite significant coal operations in Asia.
Investors for Paris Compliance urged all insurers to intensify their climate efforts and improve the transparency of their transition plans. They also called on regulatory bodies to mandate comprehensive disclosures from the industry.
Looking ahead, industry projections suggest that annual severe weather claims could potentially double from $2.1 billion to $5 billion over the next decade, underscoring the urgency for insurers to adopt more proactive strategies to stabilize premiums and enhance long-term resilience.
“The point would be to create more stability,” Taylor concluded, emphasizing the need for insurers to factor in longer-term climate projections in their pricing models.
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