Federal budget proposes $50-billion emergency insurance facility for a catastrophic earthquake

OTTAWA — The 2026 federal budget outlines a plan to create an emergency insurance mechanism worth up to $50 billion to help insurers cope with losses from a catastrophic earthquake that could strike the country in future.

According to a report published by CBC, the proposal comes amid scientific estimates of roughly a 30 per cent chance of a major earthquake on the West Coast within the next 50 years, raising concerns about the ability of financial institutions and communities to recover.

How the new insurance plan would work

Prime Minister Mark Carney's government proposes to establish the "Canadian Earthquake Insurance Facility" through new legislation. The mechanism would be funded by limited fees charged to insurers, in order to provide emergency liquidity of up to $50 billion after a severe earthquake.

The money would be used to strengthen the ability of property and casualty insurers to pay the claims they owe, and to keep essential insurance services running for homes, businesses and vehicles.

The government intends to begin implementing the mechanism with federally regulated insurers, then work with the provinces to extend its benefits to companies under provincial oversight.

However, the plan is not yet an operating program. It requires legislation, and its provisions would be reviewed five years after it takes effect.

Where earthquake risk is concentrated in Canada

Experts point to southwestern British Columbia as one of the areas most at risk, because of the Cascadia subduction zone, which runs along the Pacific coast to northern California.

Eastern Canada also faces risks, notably the corridor between Ottawa and Quebec City, including the seismically active Charlevoix region near the St. Lawrence River.

Edwin Nissen, a professor of earth and ocean sciences at the University of Victoria, explained that an estimate of the likelihood of a major earthquake is not a prediction of a specific date. It is a tool for long-term planning and for developing building and insurance standards.

He cautioned that critical infrastructure, including energy projects and pipelines, must be built to withstand severe ground shaking.

The 30 per cent figure does not mean an earthquake is certain within half a century, or that the probability applies equally across all regions of Canada. It is an estimate of the risk of a major earthquake on the Pacific coast.

These calculations help governments and municipalities develop building standards and emergency response plans, but they do not make it possible to determine the day or year of a particular earthquake.

Why insurers need government backing

Liam McGuinty, vice-president of federal affairs at the Insurance Bureau of Canada, said the industry is prepared for most earthquake scenarios, but an exceptional event could cause economic losses in the tens or even hundreds of billions of dollars.

He added that such losses could exceed the insurance sector's usual capacity to respond and become a risk to financial stability and to the Canadian economy as a whole.

The Insurance Bureau of Canada welcomed the budget initiative, noting that Canada was the only G7 country facing significant seismic risk without a comparable government mechanism for dealing with extreme disasters.

Will homeowners receive $50 billion?

The plan does not mean $50 billion would be distributed directly to residents or that every damaged property would receive automatic compensation.

The proposed funds are intended to support insurers when a disaster occurs and to make it easier to pay claims covered by the policies customers already hold.

Earthquake insurance remains optional in Canada. According to the Insurance Bureau, the share of people with this coverage in Quebec ranges between four and seven per cent, compared with about 50 to 65 per cent in British Columbia.

Those without insurance may have to look for government disaster assistance programs or other sources of support, depending on the conditions that apply in each case.

Homeowners and tenants are therefore advised to review their insurance policies and ask whether they include earthquake coverage, what the coverage limits are and what the deductible is, rather than assume that standard insurance covers all damage.

What happens next

The government has not yet set a final date for the facility to begin operating, and the announcement does not mean a confirmed increase or an immediate decrease in insurance premiums.

Experts say financial preparedness does not replace strengthening buildings and putting emergency plans in place for families and institutions.

In this way, Ottawa is seeking to prevent a destructive earthquake from turning into a compensation crisis that threatens the economy, while the need for individual insurance coverage and practical preparedness remains.