For the B.C. economy, when it rains, it pours – quite literally.
Wildfires that incinerated the community of Lytton this summer caused $78 million in insured damage following about 300 claims, according to an August report from the Insurance Bureau of Canada (IBC).
“A few months later, now we’re dealing with a flood event,” said Rob de Pruis, IBC’s director of consumer and industry relations, referring to the fallout from torrential downpours that battered the province last week.
“It’s very, very difficult for people. Compounding that is the pandemic that we have as well.”
As B.C. absorbs yet another gut-punch to the economy amid extreme weather and COVID-19, de Pruis said he expects it to take at least a month for the full financial cost of the storms to emerge as dollar amounts, and the number of claims are still being tallied. But he expects such events to increase in the coming years amid climate change.
Severe weather caused $2.4 billion in insured damage in 2020, according to IBC data released in January. But between 2000 and 2010, the Canadian insurance industry was paying out an annual average of $600 million for such claims, according to de Pruis.
“It is something that the insurance industry has taken notice of, and they are developing products to help provide that financial protection,” he said.
For example, overland flood coverage began emerging in 2015, and de Pruis said about half of British Columbians have bought the optional coverage.
Regarding the potential for insurance costs to go up, he said the insurance industry is well capitalized for events such as the recent B.C. storm, but the cost of rebuilding is increasing with the frequency of these events.
He’s urging the insurance industry, government and other stakeholders to work together to prevent or mitigate future disasters that have the potential to be quite costly.
Meanwhile, the economic fallout of this month’s torrential rainfall represents a “double tragedy” for B.C. communities, according to Jeremy Stone, who specializes in economic planning and disaster planning services.
Not only do residents have to face destroyed or damaged homes, but “people are experiencing multiple traumas, especially in the business sector,” said the director of the Vancouver-based Recovery and Relief Services Inc. consultancy.
“They’re also experiencing the loss of business or disruption of their income.”
When displaced British Columbians begin returning home to assess the damage, economic opportunities both for business owners and employees within the community may be greatly diminished.
He said many entrepreneurs operate home-based businesses that may also have been severely damaged or even destroyed during this most recent disaster. If and when business owners are ready to return to business as usual, they may find some employees may not come back.
“There needs to be on one level some really proactive work – preferably before something like this happens – where there are communication plans in place and back-to-work plans are in place so that businesses can connect with their employees and everyone can get going again,” Stone said. “But for businesses that are going to be shut down, there needs to be support for the employees themselves.”
He noted that other jurisdictions facing similar disasters will often enlist locals to help work on direct recovery efforts before regular employment within the community resumes.
Stone is urging B.C. jurisdictions to be thoughtful about their economic resilience plans by ensuring proper committees are already in place and communications priorities are aligned ahead of any future disaster.
“It is possible to do this,” he said, “but there hasn’t really been a lot of funding or political will for it.”
Even those not directly affected by the flooding will also be feeling the impacts of supply chain disruptions.
Many grocery stores have seen their shelves emptied as residents hoard items in a manner similar to what unfolded at the outset of the pandemic.
“People might overreact to what they see as potential disruptions in supply of essentials by stockpiling and so on. And while that’s understandable, to some extent it also can make the situation worse,” said supply chain expert Harish Krishnan, a professor of operations and logistics at the Sauder School of Business at the University of British Columbia.
Mike Farnworth, B.C.’s attorney general and minister of Public Safety, said that under the state of emergency declared last week, the province can use its emergency powers to mitigate against both hoarding and price gouging.
“The reality is also this: Many stores … took it upon themselves to put in place limits on items once they noticed that there was a run on certain products or people were buying 40 rolls of toilet paper [during the pandemic],” he said shortly after the state of emergency was declared.
But the increasing number of extreme weather events still has the potential to create more supply chain disruptions that will rattle the economy if supply chain managers don’t adapt, Krishnan said.
He added that he’s confident supply chain managers can adapt, “but it really does depend on the severity and the speed with which we will see some of these incidents going forward.”
And the pandemic served only to highlight supply chains’ vulnerability to disruptions and shocks, Krishnan added.
“I do think it did show the resilience and the ability for supply chains to adapt, but I think it also pointed to the fact that over time, supply chains are going to be redesigned to be potentially more regional and less global.” •