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Flood insurance ‘must be affordable:’ IBAC


December 16, 2016   by Canadian Underwriter


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Residential flood insurance should be available and affordable and the government should provide a backstop without being an “insurer of first resort,” the Insurance Brokers Association of Canada said in a document released this week.

River FloodPersonal flood insurance “must be available to Canadians who need insurance,” IBAC stated in its flood principles document, which it provided Thursday to Canadian Underwriter. “There must be a partnership of the public and private sectors that is clearly understood by all.”

Another principle is that while the government “must be available to provide a backstop to catastrophes,” governments “should not be an insurer of first resort.”

Overland flood and water damage was an issue studied in 2015 by an IBAC task force, the association’s president at the time, Lorne Perry said earlier.

“We learned about flood insurance in other countries,” Perry said in October, 2015 at the annual members meeting of the Insurance Brokers Association of Ontario, where he was a guest speaker. “We learned that flood maps in Canada need to be greatly improved.”

Perry chaired the task force.

“We learned that the storms bring greater rain intensity than they ever have, and we also learned that mitigation discussions with clients is good for both brokers and consumers,” Perry said in 2015.

Until 2015, there was generally no residential property coverage in Canada for overland flooding resulting in water entering a home.

Aviva Canada Inc. and The Co-operators Group Ltd. announced their products early in 2015 and several other carriers have since followed suit.

Overland flood insurance “will likely not deal with all of the high-risk properties and for that we believe we need government involvement,” Insurance Bureau of Canada chief executive officer Don Forgeron said Oct. 1, 2015 at the National Insurance Conference of Canada (NICC).

In late 2015, Maz Moini, vice president of commercial lines and reinsurance at Aviva Canada, told Canadian Underwriter that with some properties, the “actuarially sound premium” could exceed $10,000 a year.

Government involvement “should be focused on pre-planning instead of after the fact financial support,” Forgeron said in 2015 at NICC while moderating a panel discussion.

In its flood principles document released Thursday, IBAC said flood protection “must be affordable” and “the protection must be understandable to the consumer.”

The United States has the National Flood Insurance Program (NFIP) which, in some cases, provides a subsidy on premiums. A property cannot qualify for NFIP coverage unless it is in a community that has joined the NFIP and agrees to enforce sound floodplain management standards.

NFIP “was created in 1968 to provide flood coverage to consumers who were unable to get coverage from the very limited private market,” said Emanuel Cleaver, a Democrat representing the 5th district of Missouri in the U.S. House of Representatives, during a hearing earlier this year of the insurance and housing subcommittee of the House Financial Services Committee. Cleaver suggested at the time that when catastrophes such as Hurricane Katrina and Hurricane Sandy occur, “it pretty much decimates any private participation and the government has had to do a lot of backstopping.”

Canada does not have a program like NFIP.

“Public Safety Canada continues to work with key stakeholders, including provinces and territories and the Insurance Bureau of Canada (IBC) to explore options for a national approach to facilitate the entry of the insurance industry into the residential flood insurance market,” a federal government spokesperson wrote Thursday in an email to Canadian Underwriter.  “Among other initiatives, federal, provincial and territorial governments are currently working to leverage national flood mapping and risk assessments to inform decision-making, and to determine how to better promote public education and flood risk mitigation.”