SGI Canada Fails to Pay Dividend to Sask. Government
Saskatchewan Government Insurance (SGI) Canada faced a setback in its financial performance, failing to allocate profits to the provincial government for the first time in over ten years. The company’s latest annual report attributes this situation, in part, to the impact of “catastrophic weather events.”
While the annual report does not explicitly draw a connection to climate change, experts in the industry point out that insurance companies all over Canada are grappling with similar challenges due to severe weather patterns. These companies are actively adapting their operations to cope with these changes.
Craig Stewart, the vice-president of climate change and federal issues for the Insurance Bureau of Canada, asserts that insurance industry leaders nationwide are firmly convinced that the current trends are directly influenced by climate change. He emphasizes that what is unfolding in Saskatchewan is representative of the broader situation across the country.
SGI Canada, headquartered in Saskatchewan and operating in multiple provinces, serves as the property and casualty insurance segment of the larger SGI Crown corporation. The annual report highlights a profit of $24.4 million during the 2022-23 fiscal year, primarily attributed to investment earnings.
However, this “modest financial performance” led to the Crown corporation abstaining from disbursing dividends to its stakeholder, the Saskatchewan government, for the first time in twelve years.
SGI is refraining from commenting due to provincial byelection regulations, as mentioned by a company spokesperson. In contrast, Don Morgan, the minister overseeing Crown corporations, states that the actual profits exceeded initial forecasts.
Morgan explains that SGI’s projected lower profits for the preceding fiscal year were anticipated due to industry hurdles and elevated administrative expenses linked to a significant project aimed at modernizing business procedures and technology.
The annual report underscores frequent occurrences of “catastrophic weather events,” a surge in insurance claims, and escalating costs driven by inflation, supply chain disruptions, and labor-related challenges as the primary difficulties confronted by SGI in the past year.
Craig Stewart predicts that climate change will lead to a surge in insurance claims as the conditions for severe weather become more prevalent. Increased construction material costs due to supply chain troubles and inflation, coupled with rising labor expenses, result in higher costs for replacing storm-damaged properties.
Stewart observes that some companies are strategically limiting their exposure in high-risk regions prone to flooding. Approximately 10% of Canadians, particularly in flood-prone areas like the Prairies and British Columbia’s lower mainland, are unable to secure insurance coverage.
While Public Safety Canada’s disaster database only encompasses natural disasters up to 2020, the SGI annual report notes twelve storms classified as catastrophic events throughout Canada in the previous year. These events resulted in nearly $81 million in catastrophic claim losses.
The report discloses that the costs associated with insurance claims due to severe storms escalated by nearly 50% compared to the previous fiscal year.
Jason Thistlethwaite, a professor at the University of Waterloo’s school of environment, enterprise, and development, suggests that insurance companies might respond to rising expenses by increasing their rates. However, this short-term solution could eventually render them uncompetitive.
To address these challenges, Thistlethwaite proposes alternatives such as avoiding construction in flood-prone areas and offering public data to illustrate individuals’ risk exposure. He emphasizes that governments must take the lead in adopting these strategies. He highlights the potential savings for governments and insurers by adopting a proactive approach, as opposed to dedicating funds to post-disaster recovery.
Thistlethwaite concludes that if governments do not assume leadership, it’s unlikely that insurers or individuals will follow suit.