The Co-operators: Adapting to Climate Change

Chartered Professional Accountants (CPA) of Canada and Natural Resources Canada (NRCan) collaborated on a strategic initiative (managed by Network for Business Sustainability) that will enable CPAs to build on their existing skills and expertise to help organizations or clients adapt to a changing climate. This case study focuses on The Co-operators Group Ltd., (Guelph, ON) a Canadian-owned and operated insurance company with locations across the country. Climate change is impacting the insurance sector in Canada; this study focuses mainly on the impacts of extreme precipitation and flooding events given their increasing severity and prevalence (at the time Canada did not have a flood insurance product). In an effort to be part of the solution, The Co-operators worked with their accountants to develop a proactive approach to managing climate change risks and opportunities by creating an adaptation strategy. The outcome of the strategy included creating new insurance products and engaging with stakeholders to enhance community resilience.

Understanding and Assessing Impacts

The duration, intensity and frequency of weather events that threaten homes have increased, and floods have become one of highest risks associated with these events. Flooding affects properties and the well-being of residents. Given that Canada (at the time) was the only G7 country without a flood insurance product, a major focus of this study was the flood initiative, which included developing a new insurance product. Another primary focus was undertaking a stakeholder engagement process in order to build community resilience. Although The Co-operators had a flood initiative underway for several years, in 2014 they increased their efforts to complete the initiative after seeing Canadians suffering from the effects of climate change. The key question for The Co-operators senior management was how to provide adequate coverage for their clients at a price point that would be affordable while preserving the organization’s financial strength. A further challenge: although insurers did not provide flood insurance products, almost 70 per cent of Canadian homeowners believed their insurance policy fully covered them for flooding. The major steps in the development of the flood initiative were Modelling; Product Development; and Stakeholder engagement. However, some major challenges associated with developing this new product include developing a product solution that is simple, clear and comprehensive, identifying and quantifying risk, developing an approach to pricing, estimating return on equity (ROE) and return on investment (ROI), creating awareness of the risk exposure related to water, and making the business case for the new product.

The Co-operators Flood Initiative

The Co-operators flood initiative, showing the three major steps of the flood initiative, including Modelling; Product Development; and Stakeholder Engagement.

Image of a sustainable urban rainwater management project in the City of Vancouver. The schematic includes incorporation of greenscaping as a way of not only beautifying the streetscape, but also to provide functional purposes such as rainwater management and small areas of habitat refugia. The image shows the integration of sustainable design with climate adaptation actions. Specific foci are on the inclusion of more city street trees, native plants, areas for pollinators, rain gardens, and the creation of common spaces for gathering.

Identifying Actions

The main goals of this initiative were to develop a homeowner’s flood insurance product and to enhance community resilience. Three major steps were involved in the development of the flood initiative and include: Modelling; Product Development; and Stakeholder engagement. The Modelling phase included data collection, developing business intelligence, conducting flood mapping, and analyzing weather databases. The Product Development phases included creating a price for new product. And the Stakeholder Engagement phase involved developing the ‘Partners for Action Initiative’. In addition to developing the flood insurance product, The Co-operators explored how they could leverage their relationships with other insurers, re-insurers, banks, developers, builders, government (federal, provincial and municipal) and non-governmental organizations (NGOs) to find a solution to the flood resiliency problem. As part of these efforts, they created Partners for Action, an initiative in collaboration with academics from the University of Waterloo. Partners for Action conducted research to find ways to reduce risks to the Canadian residential property market from overland flooding. The initiative involved diverse stakeholders, including property and casualty insurers, government policymakers, flood risk experts, professional associations, businesses and the legal community. Accountants played a key role in this initiative, given that 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. Although accountants helped with the development of the new insurance product, some barriers prevented them from assisting to their full potential, including resource constraints/work effort prioritization and an inherent tendency to focus on cost.


The development of new insurance products was a main component of this adaptation strategy, which The Co-operators achieved through the creation and implementation of the homeowners flood insurance product, which was released in 2015 to Canadians. Additional insurance products will continue to be evaluated based on the changing climatic conditions and risk.

Outcomes and Monitoring Progress

The results of The Co-operators adaptation strategy include the development of a homeowner’s flood insurance product, released to Canadians in 2015. The development of this product involved the collaboration of a diverse group of professionals, including accountants, given their ability to enhance decisions regarding climate adaptation strategies. This case study highlighted the following key competencies essential to the future role of accountants that would benefit companies such as The Co-operators in progressing adaptation efforts:

  • Providing context to quantitative analysis: Accountants could carry out data analysis and link this analysis to the context of a real business problem. Accountants could help determine calculations to understand the ratio between dollars spent before and after extreme weather events to assist with resource-allocation decisions.
  • Understanding Environmental, Social, Governance (ESG) issues: Accountants could contribute more to adaptation if they had a deeper understanding of ESG issues, including climate change.
  • Managing new data: New informational resources are available. There is an opportunity to take new data sets and models to another level to enhance effective decision making.
  • Valuing natural capital: Accountants can support the adoption of natural capital accounting in their organizations and ensure that natural capital externalities are reflected in data collection, decision-making, cost benefit analysis, risk management and reporting.
  • Supporting and conducting stress testing and scenario analysis: Accountants, with their actuarial counterparts, have traditionally run stress tests to ensure organizations maintain minimum capital requirements to reflect their underlying risks. Accountants could help apply these concepts to climate change risks.

Next Steps

The Co-operators will continue to evaluate risk as related to increasing extreme weather events and use this information in creating new products and motivating change that will create more resilient communities.


Link to Full Case Study

Additional Information:

NOTE: Reprinted with permission from Enhancing Climate-related Disclosure by Cities: A Guide to Adopting the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), ©2019, by Chartered Professional Accountants of Canada. All rights reserved by copyright owner.

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