Canadian Underwriter

Private flood insurance cited in new emergency management plan

January 28, 2019   by Jason Contant

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Federal, provincial and territorial (FPT) governments could “engage the private sector to develop an affordable private flood insurance model for the entire population, including clear incentives for mitigation of flood risks,” says a newly released emergency management strategy.

Ministers have invited the Insurance Bureau of Canada (IBC) to continue to work with FPT officials through the Advisory Council on Flooding to finalize the council’s analysis on managing flood risk in Canada. This includes defining high-risk properties and modelling the costs for different high-risk insurance pool models.

On Friday, the FPT emergency management partners released the first-ever Emergency Management Strategy for Canada: Toward a Resilient 2030. It provides a roadmap to strengthen Canada’s ability to better prevent, prepare for, respond to and recover from disasters. Senior officials responsible for emergency management (EM) are tasked with the development of an FPT Action Plan that describes in detail how each government intends to advance each of the strategy’s priority areas of activity over the next five years.

The five priority areas of activity are:

  1. Enhance whole-of-society collaboration and governance to strengthen resilience
  2. Improve understanding of disaster risks in all sectors of society
  3. Increase focus of whole-of-society disaster prevention and mitigation activities
  4. Enhance disaster response capacity and coordination and foster the development of new capabilities
  5. Strengthen recovery efforts by “building back better” to minimize the impacts of future disasters.

An affordable private flood insurance model is one of the suggested disaster prevention and mitigation activities suggested in the report. “The most effective EM activities are proactive prevention/mitigation measures that are used to eliminate, reduce or adapt to risks,” the report said. “These activities include structural mitigation measures (e.g. construction of floodways and dykes) and non-structural mitigation measures (e.g. building codes, land-use planning and insurance incentives). The return on investment for these activities, while dependent on hazard type and location, would generate savings of $6 for every $1 invested in prevention.”

For “building back better,” the strategy recommends that FPT governments encourage their respective partners to create linkages between recovery and mitigation efforts to foster the establishment of mechanisms to emphasize innovation and building back better.

The Institute for Catastrophic Loss Reduction (ICLR) has identified gaps in Canadian building codes that, if addressed, would increase the resiliency of homes to severe weather. Many are relatively easy to address and add very little cost to the price of a new home.

ICLR would like to see Canadian insurers require some of these measures when they are paying to rebuild a home that was damaged or destroyed in a loss event, regardless of whether they are required by code. Some insurers may argue, on the other hand, that they can only build things back the way they were, as per the contract (‘like kind and quality’), and not put them back better, but ICLR’s managing director Glenn McGillivray disagrees.

“There are many examples of how insurers put insureds back in a better position than before a loss,” McGillivray told Canadian Underwriter last week. “The only thing needed here is the will.”

As part of the strategy, there is work to develop an accessible public information tool that would help Canadians inform themselves of their personal flood risk. A national symposium this spring for FPT officials will hear from private sector experts and academia, and discuss best practices related to flood mapping, data and science.