November 28, 2014 by Regan Reid
So the story goes that The Co-operators and Intact Financial recently commissioned a study by the University of Waterloo to discover what it would take for Canadian insurers to offer overland flood coverage to homeowners. (Canada is the only G8 country that doesn’t offer it, but that’s another issue.) The researchers talked to those who provide insurance—and found concern over a serious problem.
“It turned out in discussions with [insurers] that not only do they have virtually no faith in the floodplain maps to offer overland flood insurance, [but] they have increasingly limited faith in the current floodplain maps price risk for conventional flood coverage from sewer backup,” says Dr. Blair Feltmate, an associate professor in the University of Waterloo’s Faculty of Environment at the and the chair of Intact’s Climate Change Adaptation Project.
Why the lack of faith on the part of insurers? It’s because there are multiple problems with the maps: According to Public Safety Canada, half of them are18 – 40 years old. According to the June 2014 report of the National Floodplain Mapping Assessment commissioned by Public Safety Canada, we have mapped the geography of only 28,000 kilometres of waterways, and approximately half of that mapping was created after 1996.
The maps are supposed to identify river or inland flood hazard areas for most of the populated areas in Canada. But, according to Dan Sandink, manager of resilient communities and research at the Institute for Catastrophic Loss Reduction, “the maps that we currently have in Canada are really designed for land use planning. They provide an indication of the likelihood that an area will flood under a specific return period or regional storm event.” But they don’t assess risk.
As well, most provinces use a 100-year return period as the flood hazard area—an area that “is likely to flood in a 100 year period,” as Sandink explains it. But some areas may use a more conservative 500- year return period. And, important to the insurance industry, the maps don’t provide information on potential losses. They don’t indicate where damage is most likely to occur in a flood, or the consequences— information that’s needed to price a risk.
It’s kind of important, because municipalities rely on this data to steer development out of a flood hazard area or, if building is permitted, determine what mitigation measures need to be put in place.
You would think the urgency for updates would be as obvious as, say, rising water. In the last decade, Canada has seen total damages from flooding in excess of $10 billion. Industry experts stress that if Canada is going to adequately protect its communities from flood risks, it had better start drawing new lines on fresh maps.
“So they’ve identified the state of mapping and what some of the logical next steps would be, but these are things… that involve a lot of hours, so, therefore, a lot of money.”
Much has changed since 1975, when many of Canada’s flood maps were created by a joint federal and provincial initiative, the Flood Damage Reduction Program (FDRP). Climate change is an obvious factor. “One thing that we know is that the likelihood of intense rainfall events will increase in most of the country, certainly [in] most of the populated areas of the country, and that can affect the chances of flooding along river areas,” says Sandink. “That also presents another type of hazard that we’ve been seeing, and that is currently a pretty big concern to the insurance industry, which is flooding associated with extreme rainfall in urban areas causing sewer backup.”
“We need floodplain maps that not only tell us where the water is going to go today, so that we’re not building infrastructure that will be in harm’s way, but also those that profile where the water is going to be 25 and 50 years from now, given that the climate will continue to warm,” says Feltmate. Canada must adapt, rapidly, to avoid what will otherwise be $10-$40-billion floods.
Many Canadian cities have also grown extensively since some of these maps were created. Cities tend to pave when they expand, so when big storms hit, water that may have been absorbed by wetlands flows into sewer systems and causes flooding instead. Insurers add that if there’s ever to be overland flood insurance in this country, we also need standardized mapping guidelines implemented across the country. [The provinces] all use different guidelines and different benchmarks, which makes it very difficult for an insurance company looking to assess risk across the country to be able to use them and understand what they mean and how up-to-date they are, says Leonard Sharman, a spokesman for The Co-operators.
Sandink suggests that insurers would like to see some graduation in the hazard areas. We’d like to identify areas that are likely to flood every five years, 50 years, 75 years, 100 years, 500 years, 1000 years, rather than just the one or two delineations that we use. As well, by and large, we don’t know what parts of cities are vulnerable to storm water flooding and sewer back-up and groundwater flooding.
Public Safety Canada has proposed a National Floodplain Management Framework to identify performance guidelines and technical standards for flood mapping. It’s also suggested that a flood risk database be created with risk information, such as an inventory of buildings within a floodplain, the probability of flooding and potential damages. The database would need to be constantly updated to reflect changes in data, land use and the climate. So they’ve identified the state of mapping and what some of the logical next steps would be, but these are things that are highly technical and that involve a lot of hours so, therefore, a lot of money, says Sharman. A lot of money. The question is, who is going to pay for it?
While governments wrangle over who will foot the bill for updated maps, there are many things that brokers can do to help mitigate their clients’ flood risk in the meantime.
First and foremost, brokers must continue to educate clients on what is and is not covered in a homeowners policy. There’s a lot of confusion out there by policyholders about flood coverage and what’s covered and what’s not covered, says Sandink. In some cases where storm water flooding is insured, we don’t call it flood, we call it overland influx; and we don’t call it sewer backup flooding, we call it sewer backup. We know what we’re talking about in the insurance industry, but obviously the public can be very confused. And it’s not a good time to figure out what you’re insured for after your basement is flooded, and you’re calling up your broker trying to get your claim started.
There are many other things homeowners can do to lower their chances of flooding. Feltmate suggests homeowners disconnect downspouts and direct water away from the foundation of their homes, and that they install plastic covers over window wells so that water from severe storms doesn’t flow into their basements. These are things that are very easily executable.
Feltmate is also working with Intact Financial on 20 climate change adaptation projects across Canada that are designed to de-risk cities from extreme weather events. One of these projects is a home adaptation audit program that brings a trained auditor into a home to assess it and produce a list of measures homeowners can take to lower the probability of basement flooding. Some of our preliminary data is already showing that up to 90 percent of the homeowners act on these [findings], he says.
And that’s encouraging for the industry. It’s amazing how much risk we can take out of the system from the perspective of flooding for very little effort, very little money, says Feltmate. Very often, politicians and the general public think that it’s tremendously expensive to de-risk the system. Well, it’s not. There are aspects that are expensive, but there’s a lot of low-hanging fruit out there.
Copyright 2014 Rogers Publishing Ltd. This article first appeared in the November 2014 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.