Canada’s financial regulator and the Insurance Bureau of Canada (IBC) are stepping up pressure for a national earthquake resolution, announcing a joint tabletop exercise this fall to model the capital impacts of a severe quake.
Peter Routledge, superintendent of financial institutions at OSFI, told delegates at the National Insurance Conference of Canada (NICC) that the stress test will explore how existing industry capital would withstand a major event, and what forms of capital could strengthen the country’s resilience.
“To that end… later this fall, Celyeste and I are going to be participating in a joint effort to stress test a severe earthquake in Canada,” he said, adding that the exercise will also explore “what sort of contingent capital mechanisms might aid and make Canada more resilient.”
Celyeste Power, president and CEO of IBC, confirmed that the exercise will be hosted at OSFI in collaboration with insurers and catastrophe modeling experts. The aim, she said, is not just to quantify losses but to frame the policy challenge in terms that governments cannot ignore.
“Yes, we have a tabletop exercise that Peter is hosting at OSFI,” Power told the audience. “What I’m personally hoping to come out with is a big problem… [as] we’ve been advocating for an earthquake resolution for 13-14 years, and it has been a challenge to get governments of all political stripes to care about this issue.”
Power, who was elected as chief executive of IBC in late 2022 and assumed the mantle at the start of 2023, has made earthquake preparedness a signature issue from her first days in office. In her inaugural press release, she underscored that while IBC’s immediate priority was to help the federal government launch a national flood insurance program, such a framework could eventually be extended to address earthquake and other climate-related protection gaps.
That early warning shot set the tone for her leadership. Power quickly followed it with an opinion piece titled “Given Canada’s earthquake risk, being responsible means being prepared” (April 2023), where she pressed the case for long-term resilience.
“The latest seismic research tells us that, over the next half-century, there is a 30% chance of a major quake happening along the British Columbia coast – and a 10% to 15% chance of a serious earthquake in Quebec,” she wrote, citing studies that treat severe earthquakes not as if events, but as inevitable events with uncertain timing.
Her article urged both governments and businesses to think beyond the immediate rescue phase of a quake and to invest in systems that anticipate cascading disruptions. “What happens if the runways at the airport buckle? How do we prioritize repairing damage to roads and highways? What’s the fallback option if a major port is damaged or major bridges are impassable?” she asked. Preparing answers to those questions now, she argued, could significantly reduce the economic and human costs when – not if – disaster strikes.
Power also stressed that businesses have a stake in readiness. Drawing on US and international data, she warned that up to 40% of businesses affected by a major disaster never reopen, and another quarter fail within a year. “The less prepared a business is, the greater the impact it must overcome,” she noted, calling for closer collaboration between business leaders, governments, and scientists.
Her message was to act methodically rather than reactively. “No-one should spend their days hobbled with anxiety over subduction zones and probabilities,” she wrote. “What we should do is prepare – calmly, methodically, wisely and, above all, realistically – for the minutes and hours that follow a major quake, and for the weeks and months of economic challenges that will be felt across the country.”
Power drew a sharp comparison between Canada’s current posture on earthquake preparedness and the early days of the COVID-19 pandemic. Waiting until disaster strikes to coordinate a response, she warned, is a recipe for systemic failure.
“COVID shows what happens when we try to figure these things out as we go – it doesn’t work particularly well,” she said. “But Peter has been an excellent voice in augmenting this argument. We have a lot more work to do together, because as much as we’d like to think it’s far off, we have a long way to go to be prepared as a country.”
Routledge reinforced that message by pointing to OSFI’s broader work on climate risk measurement, under Guideline B-15. He explained that the regulator is focused on precision over speed, giving institutions space to refine their methodologies before they face public disclosure requirements.
“We have our climate risk returns, and those will be returns that institutions will submit to us annually going forward,” Routledge told the conference. “We know the first few years that data quality will not be that high. In fact, in the returns, we ask institutions to tell us, give us their judgment on the quality of data they’re giving us.”
That is why OSFI is resisting pressure for rapid disclosure. “We’re not trying to force the envelope on premature disclosure of low-quality climate data,” Routledge said. “We want industry time to figure this out… at some point, it will be important to have some disclosure, but we’ll let that come after we have great confidence in the reliability and integrity of the data.”
