Flooding Risks – Where The Canadian Insurance Market Is At

Article by Nicole Truong

Extreme weather events, such as the heavy rainfall and flooding we’ve witnessed this spring in Quebec and in British Columbia, inevitably lead to discussions about the impact of climate change and the cost of inaction.

The recent flooding in various riverside regions of Canada that has left citizens feeling helpless as they try to salvage their home and belongings from murky waters of overflowing rivers across the country, is a reminder that governments and the insurance industry could do more to prepare for the future.

In Canada, flooding is among the most onerous risks for the federal government. Since the 1970s, it has paid nearly $6.5 billions to flood victims, i.e. about 78% of the expenses incurred under the Disaster Financial Assistance Arrangements (DFAA). What’s more, in 2010-2014, it spent $3.7 billions in aid to flood victims.

As natural catastrophes recur more frequently, we expect these numbers to rise steadily in years to come.

New endorsement

While these are staggering figures, insurers in Canada have only just recently begun offering homeowners insurance protection against the risk of flood, already available in other G8 countries. In fact, the Insurance Bureau of Canada announced last winter that it had drafted a new endorsement against overland flooding which will be in force this coming June 1st, 2017, and therefore available to Quebec homeowners through participating insurers.

This is not to say that insurers in Canada have ignored the risk of flood. It is covered under automobile insurance and commercial property insurance policies. However, it begs a question as to why it took so long for insurers to offer a product for the Canadian homeowners’ insurance market.

Part of the reason is that the risk itself defies the economic parameters of insurance; i.e. it is not entirely unforeseeable and uncertain. In fact, floods tend to happen periodically, and the resulting damages are serious and costly. Foreseeability of the occurrence of floods leads to adverse selection of the risk and creates an imbalance on the market where a greater proportion of persons who are highly exposed to the risk buy the insurance protection as opposed to those who are less exposed. As a result, the insurance principle of risk sharing among insureds no longer applies. Eventually, offering the insurance protection is no longer financially sound and is unattractive because it is too expensive.

Role of the federal, provincial and municipal governements

But because of the scarceness of flood insurance, the Canadian federal government ends up paying the bill through the DFAA, which is funded indirectly by taxpayers. The provinces also provide financial assistance which only covers the affected populations’ basic needs. In the long run, as we witness floods more frequently, the situation will no longer be socially and economically viable. This is why it is high time for governments and the insurance industry to react and stem the tide before the situation deteriorates further.

The Canadian federal, provincial, territorial and municipal governments each have a role to play in assisting the insurance industry to control the risk of floods. The federal government is currently conducting floodplain mapping  to identify the boundaries of a potential flood event and to support informed decisions and investments to reduce the impacts of flooding in communities across Canada.

To be successful, it requires the cooperation of the provincial and municipal governments as they have the expert knowledge of the specificities of the regional and local areas. While municipal governments are responsible for tracking flood risk and implementing risk mitigation measures, the provinces supervise and work with them to set priorities. Provincial governments also regulate the insurance industry in this particular aspect. It is why all government levels must address the issue together.

Expectations for the future

Finally, the emerging market of home insurance covering the risk of flood in Canada will eventually ensure adequate and efficient reconstruction of infrastructures after major flooding. It will also make sharing information between various government levels and the insurance industry easier, which is in the interests of all parties involved, especially the victims. If the uptake of this new insurance product turns out to be positive, we can realistically expect quicker re-building and a degree of relief for the federal and provincial governments as there will be less reliance on the DFAA and public funds.

Nonetheless, we have a long way to go. Past governments have underestimated the needs to invest in infrastructures and in expert intelligence in order to assess properly the risk of flood. By putting their best foot forward in adopting a coherent and integral approach in tackling climate change and natural catastrophes, governments in Canada and the insurance industry will have to learn to respond efficiently to environmental and natural threats upstream as well as downstream.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

RSA Canada donates $50,000 to support residents in Quebec and across Canada impacted by floods

RSA Canada is donating $50,000 to the Canadian Red Cross to assist with relief efforts following the spring floods in Quebec and across Canada.

The donation will be split in half with $25,000 going specifically to the Canadian Red Cross relief efforts in Quebec and the other $25,000 to support efforts across Canada in the areas that the Canadian Red Cross have determined are most in need of support.

In addition, RSA is matching the individual donations of employees across the country, looking to help in the wake of these devastating floods through the company’s Matching Donation program.

“We are touched by the images we are seeing and our hearts go out to those affected by these terrible incidents,” says RSA President and CEO Martin Thompson. “We have customers, brokers and friends in Quebec and other parts of the country who have been impacted by the spring floods. The rain may have stopped for now, but we know that the clean-up will be a long process. Our focus is on providing some immediate relief through this donation.”

RSA customers can call 1 800 319 9993 with any questions. Customers in Quebec can call 1-800-873-2424. Johnson Insurance customers can call 1-800-804-0087 with any questions. More information about making a claim is available here: http://www.rsagroup.ca/make-claim. Follow us on Twitter (@RSACanada) for ongoing updates.

Related Links:

To donate to the Spring Floods appeal:

About RSA
With a 300 year heritage, RSA is a multinational quoted insurance group. Focusing on general insurance, RSA’s core markets are the UK & Ireland, Scandinavia and Canada, with the capability to write insurance business across the globe. RSA’s core businesses have approximately 13,500 employees with net written premiums of £6.3bn in 2016.

About RSA Canada
The RSA Canada group of companies includes Roins Financial Services Limited, Royal & Sun Alliance Insurance Company of Canada, Quebec Assurance Company, Johnson Inc., Unifund Assurance Company, Western Assurance Company, Ascentus Insurance Ltd., Canadian Northern Shield Insurance Company and RSA Travel Insurance Inc. (collectively, “RSA Canada”) and is part of a group of companies headed by RSA Insurance Group Plc. RSA Canada employs more than 3,000 people across Canada and is one of the oldest insurance companies in the country with roots dating back to 1833.

©2017 Royal & Sun Alliance Insurance Company of Canada. All rights reserved. RSA, RSA & Design and related words and logos are trademarks and the property of RSA Insurance Group plc, licensed for use by Royal & Sun Alliance Insurance Company of Canada. RSA is a trade name of Royal & Sun Alliance Insurance Company of Canada.

SOURCE RSA Canada

Most policies don’t include ‘overland flood insurance’ – even if they do, there are limits

By Kate McGillivray, CBC News

Increasingly severe weather in Canada has made for changes in home insurance that could leave homeowners unprotected if their house is damaged in a flood.

The first thing to know: most home insurance policies don’t include flood insurance at all, explained Pete Karageorgos, director of consumer and industry relations with the Insurance Bureau of Canada.

Since about 2013, when Toronto experienced a record-breaking stormthat flooded hundreds of basements, insurance companies have begun offering overland flood insurance, “typically as an add-on,” said Karageorgos.

In other words, if you didn’t sign up for it, it’s likely you don’t have it.

Karageorgos points to a 2016 flood in Windsor and Tecumseh, Ont., to illustrate how expensive flooding can be for homeowners — and how common it is for people to be caught unaware by their lack of coverage.

“In many cases there weren’t policies that had flood insurance, and those that did, there were usually limits,” he said.

One Windsor resident’s house sustained about $50,000 of damage, but his insurance policy only covered one-fifth of that.

Residents in Windsor and Tecumseh, Ont. were forced to do a major cleanup after a record rainfall in 2016. (Amy Dodge/CBC)

Don’t be fooled by wording, cautions Karageorgos: many policies might list coverage for water damage, but that refers to incidents like burst pipes or overflowing toilets, not severe weather and flooding.

He said homeowners should also be aware that if water is entering the basement by a crack in the foundation, for example, it falls under the category of seepage and could signal a maintenance issue that would also prevent an insurance payout.

Few Canadians know their flood risk

The introduction of overland flooding insurance to the Canadian market is having another effect, said Jason Thistlethwaite, director of University of Waterloo’s Climate Change Adaptation Project: Canadians are less likely to qualify for federal government disaster assistance.

Federal legislation, he explained, stipulates that if “insurance is readily and reasonably available,” then you don’t qualify for disaster assistance — even if you never actually purchased the insurance, or didn’t even know it existed.

“That language is interpreted differently by the provinces, but it’s confusing and it’s inconsistent, and it can be taken advantage of in the aftermath of a flood event,” he said.

Thistlethwaite is concerned that few Canadians have been given the opportunity to opt into overland flood insurance and that many are confused about what their policies cover.

A City of Toronto investigation into the next 50 years of weather predicted increasingly intense rainfall, meaning floods like the one in 2013 might become more common. (Frank Gunn/Canadian Press)

His university conducted a survey of 2,300 Canadians about how they perceived flood risk, finding that 70 per cent of respondents had not been approached by their insurance provider about overland flood insurance.

They also found very few homeowners saw themselves as being at risk or knew if they were covered or not, “despite the fact that we know for the next 50 years that flood risk is going to increase.”

There’s a small silver lining though, at least if you live in Ontario — the provincial government is available to provide some disaster assistance.

“What Ontario has said is that their disaster assistance programs will cover costs that are not covered by insurance,” said Thistlethwaite.

But that won’t mean restoring your home to its previous lustre. “This is bare minimum replacement costs,” he said.

“There’s an incredible amount of paperwork, red tape and delays. … It pays to call up your insurance company.”

Problem will get worse, so be prepared

Extreme weather is expected to increase substantially in the next half-century, leading Karageorgos and Thistlethwaite to urge that people review their policies carefully and take steps themselves to protect from flooding.

Short-term actions to mitigate damage include pointing downspouts away from the house foundation, taking valuables out of the basement, and making sure sump pumps are working and that you have a backup in case the power goes out.

Thistlethwaite also recommends a list of large-scale actions including renovating with flood-resistant materials and raising the electrical box or heating materials to the second floor.

If all that sounds expensive, consider the cost of extreme weather in Canada so far.

Between 1983 and 2008, natural disasters cost about $100 million, said Karageorgos. Since 2009, “it’s gone up 400 per cent.”

As a result, he said, insurance premiums have risen as well, which, along with increasingly severe weather, is something Canadians will just have to get used to.

Flood Threat: Severe thunderstorm watch issued for Okanagan

By Matt Meuse, CBC News

The mayor of Kelowna, B.C., is warning residents to prepare for dramatic flooding expected to begin Thursday evening as heavy rain returns to the southern Interior.

“Over the next few days, we will see water levels in our city — particularly in creeks and in our lakes — reach levels we’ve never seen before,” Mayor Colin Basran said in a video posted online by the City of Kelowna.

“I know we got a bit of a taste of it this past weekend, and by all accounts we will see flooding to that level and possibly beyond.”

Basran urged residents — even those in upland areas — to take protective measures like building sandbag berms to protect property, and to prepare 72-hour emergency preparedness kits. He said the rain may also cause road washouts and landslides.

Check in on friends

Basran also asked residents to check in on friends, family and neighbours, and to consider taking those people into their homes if possible, because hotels in Kelowna are nearing capacity.

“This is the time now where as a community, we need to come together and look after each other,” Basran said.

Kelowna floodplain

A floodplain map of downtown Kelowna shows one area the city expects may be at significant risk of flooding Thursday evening. (City of Kelowna)

Todd Cashin, suburban and rural planning manager with the City of Kelowna, said much of downtown Kelowna is at risk of flooding from Mission and Mill creeks. He said the city has been diking to prepare, but historically much of the area has acted as a spillway for the two creeks.

“You’ll see some old photos from the 1930s — basically the whole area, the flat part of Kelowna — is on a floodplain,” Cashin said.

Rain began this morning in Kelowna. Cashin says peak water levels are generally expected 12 to 18 hours after that.

Information about emergency preparedness kits and where to obtain sand and sandbags is available on the Central Okanagan Regional District’s website.

Alerts in effect across province

Hundreds of people around the province remain out of their homes after numerous evacuation orders were issued during last week’s flooding.

The B.C. River Forecast Centre has posted a flood watch for the Salmon River in Shuswap, while high streamflow advisories cover most waterways across the southern and southeastern parts of the province.

High streamflow advisories are also in place for northern parts of the province, including the Bulkley Valley, northeast B.C. and the Peace region.

Environment Canada warned storms packing up to 70 millimetres of rain are expected by Friday and could drop a further 20 to 30 millimetres across northern regions by Saturday.

Severe thunderstorm watches were issued for parts of the central and southern Interior, with the potential for strong winds, hail and heavy rain.

Real time streamflow data can be viewed on the River Forecast Centre’s website.

Water damage has surpassed fire as the leading cause of home insurance payouts, according to IBC.

Read more

Documents show many cities are wary of mapping flood risks, making data public

By Jordan Press

THE CANADIAN PRESS

OTTAWA _ When municipal officials were told last year about new tools to help them map the risk of flooding in their communities, they immediately raised red flags, suggesting they wanted no part of it over concerns about legal liability and political backlash.

Details contained in internal government reports echo a narrative across the country that show just how wary some city leaders have been about mapping and publicizing flood risks in their communities.

As one municipal official put it, they fear releasing the information would force them to use the Tim Hortons drive-up window to avoid the ire of those inside the restaurant.

The stance has mystified insurance industry representatives and local leaders who have been pushing municipalities to use new mapping tools to identify risk areas and make that information public.

“The big business case for this is we can all pay a lot more for insurance and experience the disruption, or we can invest in the infrastructure and experience less disruption to the economy and to families and lower insurance premiums,” said Edmonton Mayor Don Iveson, head of FCM’s big city mayors’ caucus.

“We can learn from these disasters and actually model out where it would make sense to get ahead of the problem.”

The questions about what local officials don’t know and why they don’t want to know it have been raised anew with flood waters overwhelming communities in Quebec and Ontario.

The Insurance Bureau of Canada created a mapping tool to figure out where there was the greatest risk of flooding, either from rising waters or overwhelming rainfall. A Calgary-based company, Tesera, is in the process of getting it ready for wider distribution.

At a session on disaster-proofing communities at the Federation of Canadian Municipalities conference last June, some delegates appeared to want nothing to do with the mapping tool.

A report from officials at Infrastructure Canada said that a delegate from one city worried that mapping flood risk could reduce property values in flood-prone areas where infrastructure solutions weren’t feasible. Another said local governments are reluctant to map flood risks because they could be liable for damages, “and they may not have the public or political support for infrastructure investments,” the report said.

The Canadian Press obtained a copy of the report under the Access to Information Act.

Craig Stewart, vice-president federal affairs for the Insurance Bureau of Canada, said local leaders were concerned about releasing the maps publicly, fearing owners of high-risk homes would take out their anger on local officials.

“However, it’s our opinion that people have a right to know their risk and in fact, Canadians should be educated about flood risk so that they can make the right decisions on how to defend themselves against it,” Stewart said.

The federal government has pledged cash for risk assessments and new infrastructure construction, hoping to nudge cities into making better decisions about what projects they need and how badly they need them done.

As well, this year’s federal budget earmarked $2 billion over 11 years, the vast majority of it to be spent after 2021, in the Liberal infrastructure program to help disaster-proof the communities. A further $281 million over 11 years is set aside for projects that help communities adapt to climate change.

The amounts won’t meet all the needs to protect communities from flooding: Edmonton, for instance, estimates it would require $2.5 billion in new infrastructure to reduce flooding risks over the next 50 years.

There is never going to be enough federal money to cover all the infrastructure needs cities have, but the funding is “more than we had before,” said Halifax Mayor Mike Savage.

“If you don’t adapt and if you don’t show resiliency, then you’re going to be in trouble. So I’m glad that the feds have identified that this is a necessity,” said Savage, whose city has mapped flood risks inland and along its coast line.

“When it comes to climate change, sticking your head in the sand is not the right solution.”

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