As the United States faces a widening flood insurance gap due to climate change, insurers there are pulling out of high-risk areas or raising premiums so steeply that many homeowners are left unprotected. California, in particular, has seen a host of market exits, including those of several big name carriers, while Florida has been left to turn to its insurer-of-last-resort. As a result, only a small percentage of homes in flood-prone US regions still carry insurance.
In Canada, the flood insurance story is different – for now. In Atlantic Canada, the primary challenge isn't the availability of coverage, but rather its affordability, according to brokers and industry association leaders.
Donald McDermaid, the president of the Insurance Brokers Association of Nova Scotia, acknowledges this is “a difficult topic” for the industry in Atlantic Canada. “What I can share is that for both personal insurance and commercial insurance, this is a moving target,” he said.
Insurers, he explained, are continuously reviewing new data and adjusting premiums, raising deductibles, and reducing coverage limits. Despite these changes, McDermaid said that in his province, they “haven’t had any customer not be able to obtain any coverage where they previously had it.”
On the commercial side, he acknowledges that a few new areas lost flood coverage following the heavy rains of 2023.
“In general, we haven’t seen significant changes yet. It’s happening more in personal lines and primarily [it was] reduced or more expensive coverage rather than none,” he said.
James Higgins, the president of the Insurance Brokers Association of New Brunswick, echoed McDermaid’s observations – and added that the federal government may finally be moving closer to a national solution.
According to Higgins, the issue in New Brunswick mirrors what’s seen in Nova Scotia: coverage is still available, but deductibles are climbing, and flood risk maps don’t always reflect the realities on the ground.
He echoes the message that McDermaid conveyed saying that, in New Brunswick, it’s not a matter of availability of coverage, it’s a matter of deductibles and the fact that the flood areas are not always precisely designated in accordance with the actual risk that they are in.
Higgins also pointed to a persistent challenge in how insurers – and even national flood risk models – assign risk levels: specifically, the reliance on postal code designations. While convenient for mapping and underwriting, this approach can oversimplify the real risk landscape by failing to account for variations within specific neighbourhoods.
In practice, this means that properties situated on higher ground, slopes, or other naturally protected areas are often grouped with nearby low-lying, flood-prone properties. The result is a tendency to overestimate risk in some areas, which can lead to elevated premiums or restrictive policy terms for homeowners whose properties may not be exposed to flood hazards. This cautious, broad-brush method favours loss prevention but can create affordability challenges for policyholders, Higgins said.
The problem is especially acute in known flood zones, and he pointed to downtown Fredericton as an example, where commercial deductibles have risen dramatically. “Some 10 or 15 years ago, you could get a $25,000 deductible for your office building in downtown Fredericton. Now you're looking at a $100,000 deductible. And that's where the government comes in,” Higgins said.
Ottawa has been developing a national flood insurance program aimed at protecting homeowners in high-risk areas who struggle to find affordable private coverage. The program – long in discussion – may finally be gaining traction. Higgins said that the government has been participating in the negotiations with stakeholders within the industry for the past several years and added that his feeling is that “they’re getting close to having an agreement.”
In his view, the current administration “seems committed” to making progress on the file, and there is growing optimism that a solution could be implemented within the next four years. He added, however, that similar optimism has existed before: “If you’d asked me four years ago, I would have said the same thing.”
Alongside this push is the recent work done by the Institute for Catastrophic Loss Reduction (ICLR) to refine flood risk mapping and planning tools. More precise risk models could help insurers price coverage more accurately – potentially easing the burden on homeowners and businesses unfairly assessed as high risk.
Higgins is optimistic that the industry will respond quickly to these tools – particularly on the commercial side that is entering a soft market. “For nearly a decade, we’ve been in a hard market, but that’s shifting. Companies are hungry to take on risk,” he said.
