‘Different financial model’ needed for flood coverage: IBC

The National Roundtable on Flood Risk, scheduled Thursday in Regina, presents a “terrific opportunity launch a national conversation on flood risk,” said Craig Stewart, vice president of federal affairs for Insurance Bureau of Canada.

Along with IBC president and CEO Don Forgeron, Stewart will be addressing the roundtable, which will be hosted by Ralph Goodale, Canada’s public safety and emergency preparedness minister, and Saskatchewan government relations minister Larry Doke.

“We believe and the federal government agrees with us that the present approach is not sustainable and we need to transition to a different financial model,” Stewart said in a phone interview. “On Thursday we will be initiating that conversation with all the key players about what a different model might look like.”

Coverage for overland flood was generally not available on residential properties until 2015. At that year’s National Insurance Conference of Canada in Montreal, Forgeron said the new residential overland products released in 2015 “will likely not deal with all of the high-risk properties and for that we believe we need government involvement.”

In its flood principles document released in 2016, Insurance Brokers Association of Canada said there “must be a partnership of the public and private sectors that is clearly understood by all.”

Related: Insurers’ advice to brokers about overland flood policies

IBAC commissioned a task force on flood after major losses in 2013. Two flood events that year ranked third and fourth among the most expensive property and casualty industry catastrophe losses in Canada over the past 25 years, according to a list compiled by A.M. Best. In 2013, floods affecting southern Alberta in June and a July 8 rain storm affecting the Toronto area gave rise to industry-wide insured losses of $1.8 billion and $996 million respectively. IBC reported earlier the insured losses from the Alberta floods were mainly sewer backup while total economic losses from that catastrophe were about $6 billion.

At NICC in 2015, Forgeron said there is “no flood insurance model elsewhere in the world that can serve as an off-the shelf solution for us here in Canada.”

In 2016, the British government launched Flood Re, a special purpose vehicle and a not-for-profit monoline reinsurer. Flood Re is subsidized by a tax levied on all carriers writing home insurance in the nation.

The United States has had its National Flood Insurance Program (NFIP) since 1968.  In a report released Nov. 3, A.M. Best said the increasing severity of flooding in the U.S. “have rendered the flood coverage solution centered on a federally subsidized program woefully inadequate,” but adds the NFIP remains “essential.”

In Canada, there are “events with enough rainfall that can overwhelm almost any stormwater management system, so it becomes quite difficult to assess risk,” Stewart said Tuesday.