Window for action on national flood insurance program is now, IBC says

Insurance Bureau of Canada (IBC) is applauding the federal government’s latest disaster assistance for flood recovery costs associated with British Columbia’s costliest severe weather event, but is stressing the urgent need for action on a national flood insurance program.

The window for action is now, Craig Stewart, IBC’s vice president of climate change and federal issues, told Canadian Underwriter Friday.

Beginning Nov. 13, 2021, British Columbia experienced a series of atmospheric rivers that caused severe flooding, landslides and mudslides across interior and coastal regions of the province. Approximately 18,000 people were evacuated, with flooding leading to “extensive damage to homes, bridges, roads, including every major highway connecting the lower mainland to the rest of Canada, and widespread damage to the agricultural industry,” Public Safety Canada said in a press release.

As of June 2022, the flooding had caused at least $675 million in insured damage.

On Thursday, Minister of Emergency Preparedness Bill Blair announced a second advanced payment of more than $550 million to B.C. through the Disaster Financial Assistance Arrangements (DFAA) program.

The payment — which includes money for evacuation operations, restoring public works and infrastructure to their pre-disaster condition, as well as replacing or repairing basic, essential property of individuals, small businesses and farmsteads — brings total federal payment to more than $1 billion for the flooding event.

IBC applauded the additional support for disaster recovery, but urged action on a national flood insurance program.

“Canada’s insurers have provided the federal government with a proposal to create a national flood insurance program,” Stewart said in a statement Thursday. “This program would ensure Canadians living in high-risk areas for flooding would have access to the enhanced financial protection that insurance provides, and allow for a speedier and more holistic recovery process.”

Stewart said the insurance industry alone is unable to provide affordable coverage for those living in the highest flood risk areas. “Instead, a public-private partnership is required at the national level, building on the approach taken in other industrialized nations. This [B.C. flooding] event is yet another example of the urgency with which we must work to accomplish this.”

At a CatIQ Connect webinar last year, a Public Safety Canada official reported two possible flood insurance models were the most promising for the upcoming national flood insurance program: the Flat Cap High-Risk Pool and the Tiered High-Risk Pool.

The first model is based on a pool for high-risk homeowners, with minimal government intervention in the operating of the high-risk insurance market, but significant support from governments to bring affordability through a single, relatively low flat premium cap for high-risk properties, said Matthew Godsoe, director of the resilience and economics integration division at Public Safety Canada.

The second model, the Tiered High-Risk Pool, is inspired in part by the Flood Re model in the U.K. and adapted for the Canadian context with additional government intervention (versus the Flat Cap model, which proposes minimal intervention).

CU asked IBC for an update on where the industry’s at with a national flood insurance program. Stewart said P&C insurers have been working with federal and provincial governments for more than five years to design the partnership needed to address flood — Canada’s greatest climate risk — head-on.

“Representatives from 30 insurance companies have devoted thousands of hours of resources and expertise to support the federal government’s Task Force on Flood Insurance and Relocation,” Stewart said. “The policy work is complete. It’s now time for investment and implementation.”

Canada’s insurers are ready to partner with federal and provincial governments to set up a program for affordable flood insurance. “Most other G7 countries maintain some form of partnership between insurers and governments to address the mounting insurance protection and affordability gap posed by climate change.

“Last fall, in a meeting with Minister Blair upon the completion of the Task Force on Flood Insurance and Relocation, IBC (on behalf of the industry) committed to form this partnership with the federal government. The window for action is now.”

Feature image: A motorist drives on a service road along the closed Trans-Canada Highway as floodwaters fill the ditches beside the highway and farmland in Abbotsford, B.C., on Wednesday, December 1, 2021. THE CANADIAN PRESS/Darryl Dyck