Canadian Underwriter

Seeing the forest for the trees: A tool to prevent flood damage

May 10, 2023   by Alyssa DiSabatino

River flowing through forest valley

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NatCat losses driven by flood damage have escalated in Canada over the past decade, but the key to preventing these may be in your client’s backyard, one expert told Canadian Underwriter. 

Insurance companies can reduce their clients’ flood exposures and premiums by supporting and incentivizing forest conservation, Daimen Hardie, executive director of Community Forests International said.  

“The simplest way to explain it is just that forests act like sponges,” said Hardie.  

“With river flooding, there will often be a lot of snow melt in the spring or just really torrential rainfall,” he explained. “All that water flowing into the rivers is what causes those rivers to overflow and flood the adjacent communities.” 

Diverse forests help to slow snowmelt and act as a “shock absorber” by slowing the water runoff, he said. “[Forests] soak up a lot of the excess water and slowly re-release it into the rivers so that it doesn’t all flow into the rivers all at the same time, which is what you get if you clearcut a forest.”  

An example would be in Atlantic Canada, which has experienced more frequent and intense storms, leading to some recent major Cats and severe flooding and damages. Hurricane Fiona caused more than $800 million in insured damages, and even more in economic damages on the east coast this past fall, according to Insurance Bureau of Canada and Catastrophe Indices and Quantification Inc. figures. 

“Even though the leaves are off the trees in a deciduous forest, we’re really lucky here on the East Coast that we have these diverse, mixed forests that have both evergreen and broadleaf trees,” Hardie said. “With the snow melt in the spring, if you have a canopy — even if it’s not in full leaf — it slows down the melting of that snow when it warms up.”

Aerial view of pine forest

What’s more, a high percentage of forests on the east coast are privately-owned.  

“It’s really common here for people to have a rural house that’s connected to maybe 100 acres of forest— more than 80,000 citizens here in the Maritimes own some forests,” Hardie said. 

For the industry, forests provide an opportunity to be proactive against Cat damage. 

“If you work with these nature-based solutions and you invest in a forest project, the adjacent communities are also going to be protected from those disasters. So, there’s also a resilience and adaptation benefit you’re getting from that one investment,” Hardie said. 

Insurers may see it as opportune — and cost-efficient — to offset their greenhouse gas emissions through forest ownership, especially now that the Office of the Superintendent of Financial Institutions is requiring insurers to disclose their GHG emissions. 

In New Brunswick, 143 hectares of forest would yield approximately $285,000 worth of timber inventory if it was cut down. On the other hand, it would cost more than $1.04 million to replace that forest’s water storage capacity through man-made infrastructure, according to a Community Forests International model. 

On a smaller scale, there are ways to engage consumers in better flood mitigation habits.  

Insurers often offer incentives in the form of reduced premiums for consumers who take measures to lower their risk profile. For example, auto insurers tend to offer lower premiums to consumers who can prove their good driving habits through telematics. 

This concept could be applied to flood insurance premium reductions as well. 

“There are some really specific things from a homeowner perspective that you can do to reduce the risk of impacts to your home, like having your gutters cleaned out or having good drainage around your basement,” Hardie said. “I think insurance companies have been good at watching those types of improvements that a homeowner can make and incentivizing them and supporting them.” 


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