How the feds’ budget benefits the P&C industry

Insurers are hoping it will be easier for homeowners to borrow money to raise their structures in areas at risk of flood or to replace roofs in wildfire-prone regions as a result of the federal budget announced Monday.

In her budget speech Monday, Deputy Prime Minister Chrystia Freeland said the government is proposing to spend $4.4 billion over five years towards Canada Mortgage and Housing Corporation (CMHC), specifically to provide interest-free loans to homeowners towards retrofits.

Craig Stewart, vice president of federal affairs for the Insurance Bureau of Canada, gave some examples of how homeowners might benefit from this program.

“For instance, if you needed to elevate your home because it’s at high risk of flooding, [that is] where something like this would come into play,” Stewart said in an interview with Canadian Underwriter. “Big asterisk though: the eligibility for these programs hasn’t been set yet.”

In its 2021-22 federal budget, the government said the proposed interest-free loan program is intended for projects to better protect homes from climate risks. It proposes interest-free loans of up to $40,000.

IBC will speak with Natural Resources Canada and CMHC about what kind of projects should be eligible for these programs, Stewart said Tuesday.

IBC would like to see retrofits for homes at severe risk of wildfire included among the eligible projects. An example would be replacing an asphalt shingle roof with a metal roof.

“The package of measures that we saw announced in the budget yesterday on climate adaptation really meet the commitments that the federal government made two years ago for a national action plan on flooding,” said Stewart. “This government has now ticked all the boxes for what we had asked for, and to which they had committed back in 2019. As an industry, we are quite happy.”

Included in the federal budget is a proposal to spend $63.8 million over three years on flood mapping. Starting in 2021-22, Natural Resources Canada, Environment and Climate Change Canada, and Public Safety Canada will use this money to work with provinces and territories to complete flood maps for higher-risk areas.

The Canadian P&C industry normally uses digital terrain models with 30-metre resolution, but the industry is looking for flood maps with finer detail.

“IBC had been advocating for two things: for higher resolution-data, LIDAR [Light Detection and Ranging] data, to be acquired for high-risk areas in the country, and [to be] made available so that insurers can upgrade their maps that we use for underwriting,” said Stewart. “And then secondly, for the federal government to come up with better flood maps themselves based on that LIDAR data. So, more up-to-date, higher-resolution flood maps that can be used for decisions around flood mitigation.”

Also on Monday, the federal government proposed to spend $200 million over three years to establish a Natural Infrastructure Fund to support natural and hybrid projects to help mitigate the impact of climate change and reduce property damage risk.

An example of where this money could be used is to acquire a wetland that would otherwise be developed by a builder, Stewart suggested. A wetland can store water during spring runoff to protect property downstream.

The idea is that during a severe rain storm or when a lot of snow melts during the spring, the water has a place to go without overwhelming the sewer and drainage systems, as Stewart told Canadian Underwriter.

Feature image courtesy of iStock.ca/MicroStockHub