Report highlights Canada’s lack of flood resilience
Flooding is the primary peril to property in Canada thanks to the combination of having lots of lakes and rivers as well as snow and rain. In spring when snow is melting and rain is falling the risk is at its highest. Despite the danger this represents, flood damage is still largely uninsured.
A report by Swiss Re takes a hard look at just how devastating a 200-year loss scenario would be for Canada. The scenario described would see flooding in multiple provinces in a season resulting in combined economic losses of $13.8 billion and insured losses of $5.7 billion.
With insurance covering less than half the loss and the expected increase in flood damage over time, it’s paramount that a better flood protection model is adapted or taxpayers and businesses will be left to shoulder the costs themselves.
While there is limited insurance coverage for water-related damage, there are very few options for broad coverage of flooding until very recently. Even now, such policies are more of an exception than the norm. According to Canadian Underwriter, Swiss Re recommends 4 measures that could be put in place to manage the country’s exposure to flood risk:
- zoning laws: Zoning laws can restrict construction in the most exposed locations and encourage it in low-risk areas.
- flood control: While costly, the benefits of government investment in structural protection measures (dykes, levees, etc.) should ultimately outweigh the costs.
- emergency response: Risk can be reduced materially when those exposed are familiar with the temporary protection measures that can be taken while an event is unfolding.
- insurance: Well-designed insurance is an economical and effective way to transfer financial risk away from business and homeowners to the insurance industry.