Canadian Underwriter

Best to Assess

December 1, 2013   by Angela Stelmakowich, Editor

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The solution for increasing insured losses from sewer back-up claims following severe weather that overwhelms municipal infrastructure is not to hike premiums and slash cover, Don Forgeron, president and CEO of the Insurance Bureau of Canada (IBC), said following a recent speech in Toronto. Rather, Forgeron emphasized, the solution is to employ innovative aids like the web-based Municipal Risk Assessment Tool (MRAT).

The tool is designed to help municipalities – perpetually facing budget constraints – identify current and future sewer and storm water vulnerabilities, thereby allowing for funding, planning and building according to their severity.

Changing weather, which is resulting in more torrential rain and flooding, is overwhelming vulnerable sewer and storm water infrastructure and causing sewer back-ups and basement flooding, Forgeron reported. “In Canada, we are now experiencing, on average, 20 more days of rain annually than we had in the 1950s.”

The genesis of MRAT was the realization that infrastructure failure in Canada was responsible for the majority of ever-mounting insured losses that accompanied rainstorms across the country.

Add to that a growing sewer and storm water infrastructure deficit. The Federation of Canadian Municipalities has pegged the sewer and storm water system infrastructure deficit at $55 billion. 


Forgeron said MRAT offers a means of viewing the issue of sewer back-up more holistically. It is an idea that will be put to the test as part of a pilot project, announced by IBC in November, involving Coquitlam, British Columbia, Fredericton, New Brunswick and Hamilton, Ontario.

These municipalities will be followed by six others: Winnipeg in Manitoba, London in Ontario, Bathurst and Moncton in New Brunswick, Halifax in Nova Scotia and St. John’s in Newfoundland and Labrador – all of which have collaborated with IBC in the developmental work on MRAT.

The tool is currently a very good prototype, Forgeron said in an interview with Canadian Underwriter. “The next step for us is to take the teachings of this pilot and modify the tool based on what we learned – and I’m sure there will be learnings – over the next year or so,” he noted.

The learnings will provide guidance on what IBC needs to do “to make sure that this tool works for anyone who wants it on a go-forward basis,” Forgeron said.

Municipalities currently have few, if any, tools to quantify the susceptibility of infrastructure to severe weather events. “We’re getting more rain events, we’re getting rain events that are greater than we’ve ever experienced before, we’re dealing with infrastructure that can’t handle it,” Fredericton Mayor Brad Woodside said in a video, played during Forgeron’s presentation. MRAT will help city engineers be proactive and include science, not just guesswork, Woodside suggested.


Information about municipal infrastructure, current and future climate, and insurance claims is combined to provide a picture of where infrastructure is vulnerable now and will be vulnerable in 2020 and in 2050.

MRAT collects and analyzes key municipal data, including the following:

• the age and design of sewer and surface water systems;

• the urban development that influences system capacity; and

• topographical features like elevation and slope that affect risk and can vary widely within a municipality.

Based on information shared by cities and insurers, a unique risk formula is developed for each municipality. Climate information is added and the risk formula input into a geographic information system visualization tool.

Once a risk formula is developed, participating municipalities will carry out rigorous testing to verify the accuracy of the formula and resulting MRAT maps. The maps – red areas will indicate that basement flooding is more likely; green areas will indicate flooding is less likely – show areas of current and future risk of failure of municipal sewer and storm water infrastructure that could result in insurable losses.

Those maps, in turn, can be used to plan and prioritize infrastructure repairs, adjust service levels and support requests for federal infrastructure dollars.

Citing the challenges associated with upgrading infrastructure, “being able to prioritize that long list is the main goal of a program like MRAT, which really allows us the tools to help set priorities,” Coquitlam Mayor Richard Stewart noted in the video.

Added Dan McKinnon, director of Hamilton Water, “Working together in a collaborative way to use information, to really gather as much information as we can as relevant to solve what is a very widespread and inevitably will be a continuing problem in the future is the right thing to do.” 


2013 has provided plenty of motivation to consider water-related losses. Severe flooding in Calgary and Toronto significantly contributed to Canada’s almost $3 billion in insured losses from natural disasters to date this year.

This far exceeds the previous four years of nat cat-related insured losses of approximately $1 billion annually, a total that itself is considerably higher than the average insurance payout for storm damage of less than $400 million annually from 1983 to 2008, IBC reports.

The flooding in Alberta and Ontario “are examples of the destructive and costly impacts that severe weather are having on municipalities, business and families,” Bruce MacArthur, president and CEO of Tesera Systems Inc., an employee-owned Canadian consulting service, says in a statement. Since 2010, IBC, Tesera Systems and Dillon consulting, a Canadian-owned professional consulting organization, have been working with municipalities across Canada to refine the development of the MRAT system.


MRAT offers a means of combating sewer backflows now, but also provides some future promise as an underwriting tool to calculate risk. That said, IBC reports it will be a minimum three-year lag before insurers have access to MRAT. And this will only happen with participating municipalities’ agreement.

“Over time, municipalities can use MRAT to demonstrate infrastructure improvements to insurers, which will allow insurers to make more informed underwriting decisions,” IBC notes.

Other stakeholders are also looking at how to make cities more resilient.

For example, the Building Climate Resilience in Cities information resources, released in late November, were developed through a series of workshops held in the United States and Canada during 2012 and 2013, notes in a recent statement issued by The Co-operators. “A well-integrated cross-sectoral approach will be critical to effectively manage the growing risks facing our climate-vulnerable cities in the decades ahead,” Kathy Bardswick, president and CEO of The Co-operators, says in the statement.

The new resources include documents relating to building climate resilience in cities, such as specific papers on priorities for collaborative action, moving from risk assessment to redevelopment, and an insurer-city resiliency toolkit.

The resources offer a collaborative platform for “co-ordinating a single, coherent voice that policymakers and planners can rely on to make decisions for the long-term resilience of cities to the changing climate,” notes Mazdak Moini, Aviva Canada’s vice president of underwriting strategy, risk and reinsurance.

“Leading insurance companies are key to building urban climate resilience. Insurers have a lot to offer, and much at stake, in working with cities to protect people and property from growing climate risks,” Mindy Lubber, president of Ceres, a non-profit organization mobilizing business leadership on climate change, says in the statement.

The private sector has a crucial and catalytic role to play in efforts to build climate resilience in cities, it notes. “However, fast
er and larger-scale investment and behaviour change is needed to ensure cities are prepared for future risks.”

Forgeron cited a World Bank study that found, on average, disasters raise government expenditures by 15% and lower revenues by 10%, leading to a combined 25% increase in budget deficits. “But there’s also evidence to show investments in mitigation reduce overall damage by much as 30%,” he said in the interview.

“We’re hopeful and optimistic that we can work with those municipalities who have challenges from a fiscal point of view in terms of implementing (MRAT). Once implemented, we think it’s going to be a very, very valuable tool in them allocating scarce dollars to the projects that they need the most,” Forgeron told attendees at the recent event.

“I think the whole notion of predictive analytics is where the industry is going,” Forgeron said in the interview.

“You’re seeing it more and more in different lines of business and I think this is very much in keeping with that,” he noted of MRAT. “It’s not just looking to the past to predict the future. It’s looking to the future to predict the future, which I think is a sea change for the industry.”