Of the existing models for flood insurance, the UK has the model best suited for the Canadian market and the US the least, said Paul Kovacs, executive director of the Institute for Catastrophic Loss Reduction (ICLR).
Kovacs spoke as a panel member during the Canadian Underwriterand Swiss Re sponsored webinar, ‘Making Flood Insurable for Canadian Homeowners.’
In the UK model, the government has made a commitment to not allow any new development in flood plains and areas deemed to be very high risk (1-in-75 years). In turn, the insurance industry does not guarantee the availability of flood insurance to properties in those high risk zones, but commits to providing it to everyone outside of the flood plain on a bundled basis, or in other words, as part of their standard or general home insurance policies or in contents and building policies in the same manner fire or theft coverages are available.
Pricing for the coverage is done on the free market, and risk-adjusted, he added.
Jens Mehlhorn, also a speaker during the webinar and head of Swiss Re’s flood group, also noted that the insurance industry and the UK government have a stated agreement that the industry will continue to make flood insurance available and affordable to those outside the flood plains, and the government will continue to invest in flood mitigating infrastructures and public education programs.
The US, on the other hand, has an entirely government-run flood program that has proven to be “terrible,” Kovacs said.
“Over the last 20 years, I have often had Canadian politicians ask me if Canada should have an American flood insurance program, where the government is clearly governing how flood insurance is done and doing a very bad job of it,” Kovacs said. “There is no program quite as terrible as that in place around the world, in our opinion.”
The full content of the webinar is archived and available to listen/view at no-cost, on demand at http://bit.ly/floodwebinar12