Federal Budget Proposes Up to $50 Billion Earthquake Insurance Facility
Finance Minister François-Philippe Champagne introduced legislation for a quake insurance facility that could give insurers up to $50 billion in emergency funding. Experts forecast a 30 per cent chance of a major Pacific Coast earthquake within 50 years.
Canada's federal budget proposes up to $50 billion in emergency funding for the insurance sector through a new "Canadian earthquake insurance facility," a centerpiece of Canada emergency preparedness planning for a major quake. Finance Minister François-Philippe Champagne introduced legislation to create the body when he tabled Prime Minister Mark Carney's second budget.
The government says the facility is meant to protect Canadians "against catastrophic earthquake risks." Experts forecast a 30 per cent chance of a major earthquake on the Pacific Coast over the next 50 years.
The Insurance Bureau of Canada, the industry's trade group, backs the plan. It says Canada is the only G7 country with significant earthquake exposure that has no government-backed mechanism to manage the risks of major quake damage.
"We're very encouraged," said Liam McGuinty, the bureau's vice-president of federal affairs. "At some point, a major earthquake in Canada is going to happen. And the greatest risks are in B.C. and then also between Ottawa and Montreal."
McGuinty said the industry is prepared for the "vast majority of earthquake scenarios." A really extreme quake would still cause significant economic loss.
"That could result in tens or hundreds of billions of dollars in economic losses and it would put extraordinary pressure on the insurance system," he said. "At that point, it's not an insurance problem anymore. It becomes a financial stability and an economic problem for Canada."
Edwin Nissen, the Canada Research Chair in Geophysics and a professor of earth and ocean sciences at the University of Victoria, said the proposal addresses a long-standing blind spot in public policy.
"I think it's right that the government's thinking ahead, planning long term for how to respond to these types of events because, ultimately, they are inevitable," Nissen said. He described a "race against the clock" in which nobody knows how much time is left.
Nissen compared earthquake prediction to a weather forecast that spans decades. "Like a weather forecast, you're assigning probabilities," he said. Those probabilities, he added, set things like building codes and insurance rates.
The quakes that worry Nissen and the insurance bureau most are natural ones on the West Coast. They are caused by shifting tectonic plates beneath the Cascadia subduction zone, which stretches to northern California.
Nissen also said West Coast residents want oil and gas facilities, including the proposed Pacific Link Pipeline, to be "seismically resilient." He said the pipeline would cross the Fraser River Delta, a wetland prone to liquefaction, where buildings can sink into the ground.
He pointed to the 2011 earthquake in Christchurch, New Zealand, which killed 185 people. His own forecast, he said, concerns the region where he lives: Vancouver Island and the city of Vancouver.
