TORONTO – A shareholder advocacy group is criticizing Canadian property insurers for supporting the fossil fuel industry while raising premiums due to climate-related disasters.

Investors for Paris Compliance said in a report released Wednesday that Canada’s seven largest liability and property insurers invested a combined $19.5 billion in oil and gas assets last year, with nearly three-quarters of that going to Toronto-Dominion Bank, while some firms also assessed risks to the fossil fuel industry.

At the same time, the property and casualty (P&C) insurance industry raised homeowners and mortgage insurance rates by 73 per cent over the 10 years to 2023, or 36 per cent after taking into account inflation, according to Statistics Canada.

“The property and casualty insurance industry is deeply entrenched in contradictions,” said Kiera Taylor, senior analyst at Investors for Paris.

“While their businesses face existential threats from climate change in the form of higher claims and rising uninsurability, they continue to fuel these risks by embracing risk and investing in fossil fuels.”

Premiums are rising as climate-related disasters, such as wildfires and major floods, become more frequent and severe, although other factors, such as rising replacement costs, are also driving up rates. P&C catastrophe losses averaged $2.3 billion per year between 2011 and 2020, up from $675 million per year in the previous decade, the report said.

Taylor says the industry has spoken out a lot about the reasons for higher premiums and asked the government for support, such as through the National Flood Insurance Scheme, but has done far less to address its own problem.

“We’ve seen the industry only tell one side of the story on this,” Taylor said.

“Insurers are part of the problem, both by fueling the risks and by passing those costs on to consumers and taxpayers.”

The Insurance Bureau of Canada has rejected some of the report’s findings, particularly claims that the industry is trying to shift responsibility to the government by introducing a national flood insurance program.

The industry is offering to launch the program on a not-for-profit basis to help address past planning decisions that have contributed to exposing 1.5 million Canadian households to high flood risk, spokesman Brett Weltman said in a statement.

“The claims in the Investors for Paris Compliance report paint an inaccurate picture of considerations related to managing climate change risks.”

He added that different insurers make their own decisions about investment and risk acceptance in a competitive market, but the industry is working with regulators on climate and energy transition disclosure requirements.

“The transition to a low-carbon economy must be done in a thoughtful and deliberate manner,” Weltman said.

The Investors for Paris report shows that some industry members are much further along than others in terms of climate commitments, investment exemptions and level of commitment to climate action.

Intact Financial Corp., Desjardins Group, Co-operators Group, Definity Insurance Co. and TD have all made net-zero commitments. All of the companies also have fossil fuel exclusion policies, which range from weak for TD to more robust for Intact and Desjardins, according to the report.

However, Intact invested about $1.5 billion in fossil fuels last year (which the company said decreased to $742 million in the first quarter of this year), Desjardins invested almost $300 million and TD Bank Group invested $15.5 billion.

Intact said its net exposure to the energy sector was two per cent of invested assets and it had adopted an interim target of a 40 per cent reduction in the emissions intensity of its investment portfolio by 2030.

“We have a proven track record of adapting to climate change and building resilient communities. We have committed to achieving net zero emissions across our business by 2050,” spokesman David Barrett said in a statement.

TD said it was taking a number of climate actions as part of its transition plan, and its insurance program includes discounts on electric vehicles and coverage for solar panels as part of home insurance.

She also noted that the data in the report compares TD’s entire banking operations to those of insurance companies with narrower remit, which affects the conclusions drawn.

Meanwhile, Wawanesa Mutual Insurance Co. and Fairfax Financial Holdings Ltd. (which operates its Northbridge Financial Corp. subsidiary in Canada) have not made net-zero emissions commitments or adopted exclusion policies, the report said. It said Fairfax remains the insurer of last resort for coal operations in Asia. Last year, it underwrote an estimated $809 million in fossil fuels and had $1.5 billion in investments, the report said.

While Fairfax is known in Canada for its larger involvement in fossil fuel insurance, the report noted that there are also large international players operating in Canada that also back billion-dollar global fossil fuel projects, such as Chubb, Lloyds, Liberty Mutual and Travelers.

But Investors for Paris Compliance says all insurers could take stronger climate action and better disclose their transition plans. It also called on regulators to force the industry to create and make public those plans.

The call for more effective action on climate change comes amid potentially much higher costs the industry could face in the future.

The Insurance Institute of Canada estimated in its 2020 report that the annual value of extreme weather claims could double from $2.1 billion to $5 billion over the course of this decade.

Taylor said the industry should consider long-term premium forecasts to prevent spikes after disasters.

“The idea would be to create more stability.”

This report by The Canadian Press was first published July 10, 2024.

Companies in this article: (TSX:TD; TSX:IFC; TSX:FFH; TSX:DFY)