A Reminder That Insurance Works—Even in the Worst of Times

When disaster strikes, the first question on every homeowner’s mind is: Am I covered?

The recent wildfires in Los Angeles have left a path of destruction, with dramatic images of homes reduced to ashes and smoke-filled skies making headlines worldwide, highlighting the damage caused by such disasters. In times like these, it’s easy to wonder whether insurers can keep up with the mounting costs of natural disasters.

In addition to wildfires, overland flooding is another significant risk that homeowners in Vancouver and British Columbia need to be aware of.

Here’s the reality: insurance is doing exactly what it was designed to do—covering losses, helping families rebuild, and ensuring financial protection in the face of catastrophe.

For homeowners in Vancouver, this serves as a powerful reminder: no matter what happens—whether it’s a wildfire, flood, or earthquake—your insurance is there to protect you. While extreme weather events are becoming more common, the safety net of insurance remains strong, giving Vancouver residents peace of mind even in uncertain times.

How Insurers and Reinsurers Handle Large-Scale Disasters with Insurance Policies

A common misconception is that if a natural disaster is too big, an insurance company won’t be able to pay out claims. But that’s simply not how the industry works. Behind every insurance policy, there’s an entire financial ecosystem designed to handle even the most devastating losses.

One of the most critical players in this system is reinsurance—large global firms that provide financial backing to primary insurers when payouts reach extraordinary levels. Think of them as the insurance companies for insurance companies.

Here’s why that matters:

• Even if a wildfire causes billions in damages, insurers have financial reinforcements to ensure claims get paid.
• Reinsurers allow insurance companies to take on high-risk coverage without going under.
• This system keeps coverage available even in disaster-prone areas like California.

Homeowners should explore various insurance products available to ensure comprehensive coverage against different types of disasters. It is crucial to insure one’s property against various risks, including natural disasters, to safeguard investments and personal belongings.

Despite the significant losses from the LA wildfires, reinsurers are generally well-prepared to handle such events. For instance, Munich Re, a leading global reinsurer, has reaffirmed its profit target of €6 billion for 2025, showing confidence in its financial resilience despite anticipated wildfire-related payouts. Analysts at Berenberg have also suggested that the California wildfires are unlikely to materially affect the 2025 earnings of major reinsurers, reflecting the industry’s robust risk management and capitalization.

However, there’s a growing challenge: as climate-related disasters become more frequent and severe, reinsurance costs are rising worldwide. This increase can lead to higher premiums for primary insurers, which may eventually be passed down to homeowners. Additionally, insurance coverage for landlords and homeowners should include protection against potential loss of rental income from rental properties, ensuring financial stability even when a claim affects the ability to generate rental income.

Will Insurance Costs Rise—Not Just in LA, But Everywhere?

While coverage remains in place, there’s another question looming over the future: What happens to the cost of home insurance after making a claim? Making a claim could result in losing a claims free discount, which may subsequently lead to an increase in the policy premium.

Insurance policies typically cover accommodation and other living expenses during emergencies, such as evacuations. These policies provide for additional living expenses that may arise if individuals need to temporarily relocate due to a covered claim, including costs such as hotels, meals, and storage. This ensures that policyholders have financial support for accommodation and other living expenses during distressing situations.

Why Vancouver Homeowners Can Feel Secure

Here’s the good news for homeowners in Vancouver: while natural disasters can and do happen, the Canadian insurance coverage market remains stable and well-regulated. Unlike California, where some insurers have reduced coverage in high-risk areas, Vancouverites can count on their policies when they need them.

Flooding is another natural disaster that Vancouver homeowners should be prepared for, and it’s important to understand how it affects insurance coverage.

What makes the Canadian market different?

• Comprehensive Protection: Insurance providers in Canada have strong financial reserves and regulatory safeguards.
• No Coverage Gaps: Unlike some areas in the U.S. where wildfire risks have made policies harder to obtain, insurance in Vancouver remains widely available.
• Forward-Looking Policies: The industry is constantly adapting to new climate risks to ensure long-term stability for homeowners.

However, it’s important to note that while home insurance covers fires, floods, and other natural disasters, earthquake coverage is not automatically included in standard policies. Vancouver sits in a seismically active region, so many insurers offer earthquake insurance as an add-on or separate policy. Homeowners should review their insurance coverage to ensure they are protected against all potential risks.

Final Thoughts

The LA wildfires highlight an important fact: insurance is doing what it’s meant to do—protecting homes, families, and businesses from disaster.

It’s also crucial for homeowners who run a business from their home to understand their coverage options and ensure both personal and business assets are adequately protected.

Yes, certain areas might see premium increases in the future, and insurers will continue to adjust to a changing climate. But the core promise of insurance remains intact.

For Vancouver residents, this means one less thing to worry about. If disaster strikes, your coverage is there for you—ensuring that you, your home, and your future are protected.