Ottawa Urged to Step In on Earthquake Insurance Gap
Ottawa is facing renewed calls from Canada's insurance industry to establish a federal backstop for catastrophic earthquake losses — a move that could reshape how millions of Canadians are protected when the ground shakes.
The Insurance Bureau of Canada and major insurers are pressing the federal government to adopt a program modelled after the U.S. Terrorism Risk Insurance Act (TRIA), a post-9/11 mechanism where the federal government acts as a reinsurer of last resort when private markets can't absorb catastrophic losses on their own. Advocates want Canada to build a similar framework, but designed specifically for earthquake risk.
Why the Push, and Why Now
Canada sits on some serious seismic fault lines. British Columbia's Pacific coast faces one of the highest earthquake risks in North America, while parts of Quebec — including the Ottawa Valley itself — also carry elevated risk from ancient fault systems. Yet earthquake insurance uptake among Canadian homeowners remains stubbornly low, in part because premiums are high and coverage can be hard to find in vulnerable regions.
The concern from insurers isn't hypothetical. A major earthquake in a dense Canadian urban centre — think Vancouver or Montreal — could generate insurance losses in the tens of billions of dollars, potentially overwhelming private insurers and leaving policyholders without full compensation. Without a federal backstop, some insurers might simply stop offering the coverage altogether.
A TRIA-style program would have the federal government absorb losses above a certain threshold, encouraging private insurers to keep offering coverage at more accessible price points. The U.S. model has been widely credited with keeping terrorism insurance available and affordable in American commercial real estate markets since 2002.
What It Means for Ottawa Residents
For Ottawa homeowners and businesses, a federal quake backstop could eventually translate into more accessible earthquake coverage options — even if the capital isn't the highest-risk zone in Canada. The Ottawa Valley has experienced notable earthquakes historically, including a 5.0-magnitude tremor in 2010 that rattled windows across the region and prompted a spike in insurance inquiries.
More broadly, this is a conversation about whether the federal government has a role to play in making catastrophic risk insurance accessible — similar to the arguments made for flood insurance reform, which Ottawa has also been grappling with in recent years.
The Political Hurdle
Creating a federal reinsurance program isn't simple. It requires political will, actuarial frameworks, and coordination between the federal government, provinces, and the private insurance market. Critics sometimes argue that such backstops can distort the market or encourage building in high-risk areas.
But with climate-related disasters growing in frequency and severity, the appetite for federal risk-sharing mechanisms is clearly growing — and the earthquake file is now firmly on the federal government's radar.
For Ottawa policymakers, the question is whether Canada can get ahead of a potential catastrophe before one forces the issue.
Source: Insurance Business Canada via Google News Ottawa RSS feed.
