Spring flood dangers spotlight lack of insurance coverage for Canadian owners: consultants

May 26, 2023 | blog

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As the spring season brings greater flood threat to Canadians, as seen in British Columbia just lately, consultants say many owners stay with out enough insurance coverage to cowl excessive climate’s injury to their properties.

“I would say that Canadians in general are not truly aware of the risks that their homes are exposed to, and the exposure they have to extreme weather events and the potential losses they could experience,” mentioned Michelle Laidlaw, affiliate vice-president of The Co-operators Group Ltd.’s nationwide product portfolio.

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Flooding is the largest under-insured local weather threat in Canada, mentioned Victor Adesanya, vice-president of insurance coverage at DBRS Morningstar, particularly throughout the spring thaw. IBC mentioned greater than 1.5 million households in Canada are “highly exposed” to flood threat.

In comparability, as wildfires in Alberta have pressured evacuations and crammed the skies with smoke, the Insurance Bureau of Canada mentioned commonplace home-owner’s insurance coverage covers fireplace injury in addition to the prices of mass evacuations.

Storm surge is one other huge under-insured threat, mentioned Nadja Dreff, senior vice-president and head of Canadian insurance coverage additionally at DBRS Morningstar. The Atlantic is at notably excessive threat of storm surge, which tends to be within the aftermath of hurricanes or different such storms, mentioned Adesanya.

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The dangers for these two occasions are solely rising with local weather change, mentioned Dreff.

“There is very much a need for this coverage. And yet, we still haven’t gotten to that level where we can say the insurance sector completely is able to cover all the risks,” she mentioned.

IBC has mentioned overland flood protection for injury from overflowing our bodies of water is mostly solely coated with an add-on to insurance coverage. It could not even be accessible when you reside in a recognized flood plain, it mentioned.

Home and enterprise insurance coverage insurance policies additionally don’t usually cowl coastal flooding or storm surge flooding, IBC mentioned, which suggests injury from rising water ranges and waves brought on by storms is mostly not coated.

But among the largest injury can come from these sorts of occasions, as illustrated by hurricane Fiona, which hit properties in Atlantic Canada final fall. According to the IBC, extreme climate induced $3.1 billion in insured injury in Canada in 2022, with Fiona costing $800 million.

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“Incidents of extreme weather, including flooding, they’ve become more sudden, more frequent and more severe. And so what we’re seeing is an increase in pricing, an increase in the cost of insurance for Canadians,” mentioned Laidlaw.

Cooperators is the one insurance coverage firm that gives storm surge protection for all Canadians, and never simply these at decrease threat, she mentioned.

Right now, round 80 per cent of Cooperators’ purchasers are coated for storm surge, however there’s decrease uptake in higher-risk areas, mentioned Laidlaw. For instance, she mentioned solely 60 per cent of Cooperators’ purchasers in Atlantic Canada are coated for storm surge.

That may appear counter-intuitive, however it’s probably as a result of insurance coverage premiums are based mostly on threat, mentioned Laidlaw.

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“Where we see the highest risk, you will also see the highest premium,” she mentioned.

Laidlaw mentioned it’s doable there will likely be an uptick in curiosity amongst higher-risk owners as they rebuild from Fiona’s injury, however that hasn’t occurred but.

Meanwhile, the federal authorities has promised to face up a low-lost nationwide flood insurance coverage program, “aimed at protecting households at high risk of flooding and without access to adequate insurance.” The newest federal finances introduced $31.7 million over three years for the creation of this system, starting in 2023-24.

“They’re trying to fill a gap that’s existed for a while now,” mentioned Adesanya, although it’s not but clear what kind this system will take.

There are applications in different nations that give perception into what sorts of fashions are doable, mentioned Adesanya. For instance, the U.S. nationwide flood insurance coverage program is government-driven, whereas within the U.K. it’s industry-driven, with threat shared throughout insurance coverage firms, he mentioned.

The federal finances mentioned this system would come with providing reinsurance by means of a federal Crown company in addition to a separate insurance coverage subsidy program.

IBC has been advocating for such a program, and mentioned it’s anticipated to assist velocity up restoration and rebuilding in flooded communities in addition to cut back unplanned catastrophe prices for the federal authorities.

“Its implementation is the single most important step Canada can take to better prepare for the impacts of climate change,” the group mentioned in a press launch.

This report by The Canadian Press was first revealed May 26, 2023.


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