How an Innovative Insurance Product Helps Clients Weather Climate Change

By the nature of its business, Canadian insurer, The Co-operators, is acutely aware of climate change impacts. Here's how it helps communities prepare.
Sakis Kotsantonis NBS September 23, 2017

The Co-operators Approach to Flood Insurance

The Co-operators has more than $35 billion in assets under administration and two million people insured. Yet, the organization has humble beginnings. It was originally formed in 1945 by a group of farmers in Saskatchewan, Canada, who sought to protect themselves and their communities when traditional insurers would not provide needed coverage. This community-oriented ethos – and the organization’s co-operative structure – remain central today.

By the nature of its business, Canadian insurer, The Co-operators, is acutely aware of the impact of climate change. “The question is no longer preventing, but adapting to climate change,” says Bruce West, CPA, CA, executive vice president and chief financial officer. “So how can we better prepare our communities to deal with it?”

This question stood front and centre in 2013. That year, rainfall triggered the most catastrophic floods in Alberta’s history. Total damage estimates exceeded C$7 billion. And, Canada was the only G7 country not to provide homeowner insurance against overland flooding.

The Co-operators knew that climate change was likely to produce more extreme weather events, and wanted to be part of the solution. 

Sustainability in the Boardroom

The Co-operators has strong commitment to sustainability from the CEO and the Board’s Sustainability and Citizenship Committee. Formed in 2007, this committee includes four of the 22 directors and the chair of the Board of Directors. This commitment provides a strong basis for climate change adaptation efforts.

The Co-operators was well positioned to proactively manage climate change risks and opportunities:

Climate Change Adaptation Strategy in an Insurance Firm

Two main components of The Co-operators’ adaptation strategy were: a) creating new insurance products for Canadians and b) engaging with stakeholders to create more resilient communities.

Although The Co-operators had a flood initiative underway for several years, after the Alberta floods, they increased their efforts to complete the initiative.

The Co-operators staff collected data from many sources, including other organizations around the world with experience of flood insurance.

Then, they translated that knowledge to the Canadian environment. George Hardy, CPA, CA, vice president, Personal Lines and Underwriting, explained: “We took what is really engineering data associated with rainfall and river depth, as well as the climate impact on rivers, and translated that into a risk that is specific to the location of a house in Canada.”

Hardy described some of the product development challenges: 
Even as they developed the insurance product, The Co-operators sought to work with stakeholders in order to create more resilient communities.The Co-operators built a “pre-competitive space” in which to collaborate with other insurers, re-insurers, banks, developers, builders, government and non-governmental organizations to find a solution to the flood resiliency problem. As part of these efforts, they created Partners for Action, an initiative which now resides at the University of Waterloo.

Finally, in May 2015, The Co-operators unveiled “Comprehensive Water” as an option for Albertan home insurance customers, along with the slogan: “We can’t change the weather, but we can weather the changes.” 

The Role of CPAs

Finance teams understand risk assessment, tax implications, capital planning, financial management and performance management: all critical concepts in business decision-making around climate change adaptation initiatives.

Below, The Co-operators staff outline key accounting skills that they believe will help companies adapt to climate change:

A Product to Serve & Protect – and Prepare – Citizens

What is particularly interesting about “Comprehensive Water” is that it encouraged and enabled thousands of Canadian citizens to create climate change adaptation strategies for their own homes and families. It protected them and helped them proactively prepare for extreme flooding. Other industries and countries will have very different versions of this story, but the moral is the same: The effects of climate change are already happening and it is time for us all to start adapting.

This resource is based on the Chartered Professional Accountants of Canada's climate change adaptation initiative, which is partly funded by Natural Resources Canada and managed by NBS. Download the full case study (PDF) here.

This accompanying video explains how CPAs at The Co-operators helped the organization prepare for and adapt to climate change.
Check out other videos from CPA Canada’s climate change adaptation initiative.

Related Resources

Explore the full list of NBS climate change resources and learn from the following organizations also implementing climate change adaptation: 
Case Study

This Canadian travel company has a two-part climate change adaptation strategy: (1) operational optimization and (2) identification of future opportunities.

Sakis Kotsantonis
KKS Advice
Elin Williams
Case Study

Learn how Frontiers North Adventures, a Canadian travel company, identified the risks and looked for opportunities in the face of climate change.

NBS
Case Study

At TransLink, finance is responsible for sustainability. Sustainability efforts such as climate change adaptation are embedded throughout the organization.

S. Jeff Birchall
Elin Williams
NBS
Case Study

Accountants play a core role in climate change adaptation. They provide analysis to underpin key decisions, adding substance to sustainability discussions.

S. Jeff Birchall
Case Study

Accountants are more than bean counters. At Horizon Utilities, they are leaders on climate change adaptation.  

S. Jeff Birchall
NBS