Canadian Underwriter
Feature

Pain and Gain


October 1, 2013   by Angela Stelmakowich, Editor


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Damage from severe weather events may be insurable; it may not be insurable. But whether covered or not, someone, somewhere is going to have to pick up the tab.

In the case of flooding, that payer may be the insurer through a claim, government through disaster assistance and recovery efforts, or the home or business owner who does not qualify for either.

Sharing the pain to share the gain (or, at least, avoid the loss) is an idea getting a lot of traction of late. Alberta seems on board with a “one for all, all for one” approach in the wake of the loss and cost (the latter still rising) from the severe rains and subsequent flooding in June.

Recent media reports indicate that Doug Griffiths, Alberta’s municipal affairs minister, says Alberta is looking to Ottawa to help pay for flood prevention projects and recovery costs. If the federal government already pays for the lion’s share of disaster recovery costs, investing in mitigation efforts would surely help with reducing the tab.

The Alberta government’s estimate, albeit preliminary, on recovery costs stemming from the June flooding is approximately $5 billion.

As for insurable loss, the flooding has overtaken the 1998 ice storm as Canada’s costliest natural disaster ever, with insured property damage currently estimated to exceed $1.7 billion. Property Claim Services Canada reports that well in excess of 25,000 related claims have been filed.

Those figures were released not long after another estimate from PCS-Canada, this time $850 million in insured property damage from July’s wind and thunderstorm event that produced flash flooding in and around Toronto.

In both cases, cautions were issued that the figures were expected to climb higher.

Those figures are among many that make words (and actions) like prevention, mitigation and resilience all the more appealing.

For example, the Alberta government-commissioned flood mitigation panel has recommended, among other things, that berms with dry ponds be built in remote areas in the headwaters of the Elbow and Highwood rivers, and that channels to divert water be built in more populated areas. Associated costs would run from $660 million to $830 million.

More big figures, but ones that long term could prove a sage investment. “We know it is impossible to prevent floods from happening; however there’s a lot we can do to lessen the impact these events have on Alberta’s communities,” Griffiths says.

The City of Sault Ste. Marie in northwestern Ontario would likely have something to say about the value of preventive measures. The city was hit hard in September when it witnessed more than 86 millimetres of rainfall over just four hours, and about 140 millimetres over two days.

The rainfall, which a city press release characterized as extraordinary and unforeseen, caused significant damage to municipal infrastructure and private homes. Despite the damage, the city notes, “were it not for the significant improvements made in recent years to the city’s storm and channel diversion programs, damage would have been much worse.”

Clearly, both co-operation and preventive measures have a place in trying to minimize flooding-related costs and loss. The solution is likely to include an insurance scheme for overland flooding, although just how quickly that scheme could or will come together remains a question mark.

A new report commissioned by The Co-operators, reflecting input received from representatives for some of Canada’s major insurers, indicates insurers are split on whether or not overland flood insurance is viable.

Beyond that, a key recommendation within the report was to initiate a broad-based discussion on the actions necessary to improve flood and disaster risk management with key stakeholders.

“The way things stand, property owners are not adequately protected under a system that places too much emphasis on recovery at the expense of mitigation,” Kathy Bardswick, president and CEO of The Co-operators, noted in a statement.

Sounds like advice for one and all.


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