Canadian Underwriter

Will feds get involved in flood coverage for high-risk homes?

November 16, 2017   by Greg Meckbach, Associate Editor

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Despite calls from the industry for public sector involvement in covering flood risk to high-risk residential properties, the federal government has not committed to any programs that would lead to public sector involvement in flood coverage.

Canadian Underwriter asked Public Safety Canada this week whether the federal government agrees that there is a need for public sector involvement in residential flood insurance for properties that cannot get affordable coverage from the private sector. The federal government was also asked if it would rule out introducing a system similar to the United States National Flood Insurance Program or similar to Flood Re in Britain.

Public Safety Canada did not tip its hand leading up to a round table discussion on the topic in Regina Thursday, saying only that participants are “discussing the requirements for developing a sustainable financial management system for flood risk.”

Related: ‘Different financial model’ needed for flood coverage: IBC

The round table Thursday was hosted by Ralph Goodale, Canada’s public safety and emergency preparedness minister, and Saskatchewan government relations minister Larry Doke. Insurance Bureau of Canada and Insurance Brokers Association of Canada officials are also attending.

The “goal is to launch a formalized national dialogue on flood risk, and discuss what steps can be taken to address this challenge,” a Public Safety Canada spokesperson stated Thursday of the round table in an email to Canadian Underwriter.

“In the event of a large-scale natural disaster, the Government of Canada provides financial assistance to provincial and territorial governments (PTs) through the Disaster Financial Assistance Arrangements (DFAA), administered by Public Safety Canada,” she added.

Related: Insurers’ advice to brokers about overland flood policies

In 2014, the federal government said in its budget document that it “proposes to consult with the insurance industry, provinces and territories to explore options for a national approach to residential flood insurance.” The following year, the Liberals replaced the Conservatives as the ruling party and three insurers – Aviva, The Co-operators and RSA Canada – announced overland flood coverage for residential properties.

More companies have since followed suit, but flood insurance from the private sector will “likely not deal with all of the high-risk properties,” IBC president and CEO Don Forgeron said at the National Insurance Conference of Canada in 2015.

Swiss Re concluded earlier that that “9% of Canadian homes are located in a 100-year flood zone and can be considered at risk for severe flooding,” Balz Grollimund, head of underwriting for Canada and the English Caribbean at Swiss Re, told Canadian Underwriter in 2016. For such properties, flood insurance “is either not available or the premium is preventively high,” Grollimund added at the time.