Insurers, municipalities urged to share flood risk data

Improved flood risk data-sharing between insurers and municipalities would help improve Canadian homeowners’ flood resilience, says new research from the University of Waterloo.

“Insurance companies use data to calculate a property’s flood risk and the resulting costs, including information on the characteristics of a house or the surrounding area,” said Dr. Jason Thistlethwaite, a professor in the Faculty of Environment at Waterloo and co-lead of the Climate Risk Research Group.

“But municipalities use data to identify flood-prone areas of a town or city and make decisions to prevent and mitigate flooding to neighbourhoods with measures like upgrades to infrastructure.

“The problem is, they haven’t been working together and the consumer is on the hook.”

The study, Evaluating a public-private data-sharing platform for improving flood insurance availability and affordability in Canada, is available at cost and appears in Regional Environmental Change.

At the heart of the research is the notion that insurers’ flood risk data could help municipalities decide on the urgency of infrastructure improvements in areas of highest flood risk. Such improvements would, in turn, lower homeowners’ risks, thus lowering their property insurance rates, the university says in a release announcing the paper’s publication.

The paper’s abstract discusses the creation of the Resilience Bridge (RB) Platform, which is designed to allow insurers and Canadian municipal officials to exchange flood risk and resilience data.

“Senior staff and executives in both sectors evaluated the RB Platform and weighed in on the platform’s ability to foster cross-sector collaboration and drive actions that could reduce the number of high-risk ‘uninsurable’ properties,” the paper’s abstract reads.

See also A Warning to Hurricane Ian Policyholders About Loss Mitigation Versus Loss Prevention—A Sue and Labor Clause Analysis Can an insured recover costs to prevent a loss under a property insurance policy? If a loss occurs, can an insured recover the costs to reduce or mitigate damage from further damage? The answer is to read the full policy terms to make this determination. Generally, property insurance policies have terms which follow maritime and inland marine forms which require the policyholder to take steps to reduce or mitigate a previous loss and usually pay costs to do so. It is much less likely that a policy will reimburse fully for the costs to prevent a loss from occurring—but read the policy carefully. This issue involving a sue and labor provision was discussed by the Florida Supreme Court. Following prior case precedent interpreting the sue and labor clause, the court explained that: “An insured has the duty to exercise the care of a prudent, uninsured owner to protect insured property so as to minimize or prevent the loss for which the insurer would be liable. The purpose of the sue and labor clause is to reimburse the insured for those expenditures which are made primarily for the benefit of the insurer to reduce or eliminate a covered loss.” Did the sue and labor also pay for costs to prevent a loss? Not in that policy: “…Zurich correctly contends that the Sue and Labor clause in the Swire-Zurich policy is specifically applicable only after an actual loss has occurred or is occurring. Because Swire was acting to prevent a potential collapse of the building, and no actual loss had occurred, the $ 4.5 million expended by Swire is not recoverable under the policy’s Sue and Labor clause. …the policy’s Sue and Labor clause applies only in the case of an actual, covered loss. Any other conclusion would result in the Sue and Labor clause becoming the primary coverage provision of this contract without regard to the content of the contract or the coverage it was designed to provide. The reasoning suggested by Swire is certainly logical, to the effect that the preventive measures may have conferred a benefit upon the insurance company. If the Sue and Labor clause had been worded differently or if it had included language concerning the prevention of loss, the conclusion may have been different.” Hurricane Ian victims should be aware of property insurance provisions which require a policyholder to repair and take action to prevent further loss or damage. With soon to be Hurricane Nicole about to strike Florida, these provisions are important duties. Policies may also provide benefits to take these emergency and temporary repairs before the winds and rains of Hurricane Nicole cause further damage. Thought For The Day “You can never protect yourself 100%. What you do is protect yourself as much as possible and mitigate risk to an acceptable degree. You can never remove all risk.” Kevin Mitnick

Related: Insurers estimate catastrophe losses in July-August updates

Canada has seen two major flood catastrophes in a month, both resulting from water damage after tropical storms. The remnants of Hurricane Beryl passed through Toronto and Ontario in July, causing insurers an estimated $940 million in damage, per data from Catastrophe Indices and Quantification (CatIQ). And in August, Tropical Storm Debby blew through Montreal and Quebec, causing catastrophic flood damage, although official claims estimates are not in yet.

P&C insurers are calling on Canadian municipalities to focus on infrastructure upgrades in response to the elevate flood risk emerging from changing climate patterns.

These more intense and frequent rainfalls are coming at a time when Canadian cities’ water infrastructure is vulnerable, as suggested in a StatsCan report.

But funding the upgrades will not be easy. More than $40-billion worth of Canada’s wastewater and stormwater assets are in either “very poor” or “poor” condition and in urgent need of repair, says a March 2023 report by Statistics Canada.

Sharing data between insurers and municipalities would help identify and triage the most urgent spots in need of an upgrade, Waterloo’s researchers suggest, which would help build long-term resilience to flood.

“Governments and insurers are missing an opportunity to make infrastructure more resilient,” the University of Waterloo states. “Data that demonstrate how investments in risk reduction lead to lower premiums even over the long term would go a long way to improving the business case for climate resilience.”

Feature image courtesy of iStock.com/paitoonpati