by Michael Mata
Twenty-two municipalities in southwestern British Columbia are considering buying insurance to bring vital infrastructure back to operating capacity quickly in the event of an earthquake.
According to Natural Resources Canada, British Columbia faces a one-in-three chance that a powerful earthquake will hit its western shores within the next 50 years. The strong tremors and subsequent tsunami would destroy infrastructure that is crucial to the survival of communities, such as water and gas lines, highways, telecommunications, hospitals, and others.
Some of the more at-risk communities are raising concerns that funding from the provincial and federal governments might be insufficient to rebuild damaged infrastructure following a major natural disaster. The Municipal Insurance Association of British Columbia (MIABC), which co-ordinates liability and some property insurance for 170 local governments, has examined these concerns.
Under the current system, the federal government provides disaster relief funds to provincial and territorial governments via the Disaster Financial Assistance Arrangements (DFAA) program. It’s up to the provincial and territorial governments to distribute these funds as they see fit.
However, when Tom Barnes, CEO of MIABC, examined the structure of these DFAA arrangements, he realized that there was a significant funding shortfall, and that it would be a challenge for local governments to fill the financial gaps, especially if federal funding arrived late. The current program would reimburse local governments for about 80% of the damages.
The lower mainland of BC has uninsured municipal infrastructure valued at approximately $97 billion. According to MIABC’s analysis, which was done in partnership with reinsurance companies, if 10% of the area’s municipal infrastructure was damaged and needed to be replaced, there would still be an unfunded liability gap close to $2 billion.
Munich Re Canada is one of the reinsurers that has been working hard to develop an insurance plan that focuses on infrastructure loss. The company’s Canadian CEO, Philipp Wassenberg, said the product could be ready in two months.
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