In some rare and devastating moments, even the insurance company needs to make a claim.
One of the country’s largest insurers said Monday it is taking a financial hit of more than quarter of a billion dollars from this summer’s unprecedented flooding in Calgary and Toronto, as well as from claims resulting from the Lac-Megantic train explosion.
Those losses are much smaller than what Intact Financial Corp., which issued the notice, will actually pay out however. The company said in a release it will recoup hundreds of millions in claims through its own insurance coverage.
“The devastation brought on by recent flooding and torrential rain is unprecedented,” Charles Brindamour,Intact’s CEO said in a statement.
Read More: Insurance companies brace for flood claims
In a press release, Toronto-based Intact said it expects to take a $170-million charge related to the July 8 downpour in Toronto, which dumped more than 125 millimeters of rain within a few hours across the city’s downtown and west end.
Intact estimated $300 million in claims will be made by its Calgary and southern Alberta customers, but its after-tax charge will shrink to $105 million because of “re-insurance” it holds for catastrophe related pay-outs.
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There is a dedicated group of companies in the insurance industry, such as Munich Re Canada and Swiss Reinsurance Co. Ltd., that specifically sell reinsurance coverage to insurance firms wanting to reduce their risk of paying out potentially huge catastrophe claims.
“It’s insurance that the insurance company buys; if their losses get too high than a re-insurer covers them,” Tom Mackinnon, an analyst for BMO Capital Markets said.
The Lac-Megantic train explosion – occurring just two days after the Toronto floodings – will see Intact take another $25 million dollar charge.
“Our thoughts are with the community at this very difficult time as they grieve and cope with the loss they suffered in the aftermath of this tragic event,” Intact added in the statement.
Yet in a sentiment likely shared across the insurance industry, Brindamour said Intact must “adapt the protection” provided under its policies given the sharp rise in natural disasters over the last decade or so.
The fallout from the most recent string of disasters will apply upward pressure on premiums or see eligible coverage scaled back, experts say.
“The scope of the damage and destruction that we have witnessed in recent weeks is a stark reminder that we must adapt the protection offered to Canadians to ensure it remains sustainable in light of the greater prevalence and severity of weather events,” the Intact chief said.