Spring flood risks expose insurance coverage gaps

Over 1.5 million households are "highly exposed"

Spring flood risks expose insurance coverage gaps

Catastrophe & Flood

By Mika Pangilinan

As the arrival of spring brings an increased risk of flooding, experts have raised concerns about the lack of adequate insurance coverage among Canadian homeowners.

Over 1.5 million households in the country are considered “highly exposed” to flood risk, according to the Insurance Bureau of Canada (IBC).

However, the IBC has noted that most insurance plans only cover damage caused by overflowing bodies of water through an add-on coverage option. This coverage may not even be available to those living in known flood plains.

Additionally, coastal flooding and storm surge flooding are also typically not covered by home and business insurance policies, according to the IBC.

Michelle Laidlaw, associate vice president of The Co-operators Group’s national product portfolio, said the cost of insurance premiums reflects the level of risk associated with specific regions.

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

DBRS Morningstar analysts have identified flooding and storm surges as among the most under-insured climate risks in Canada.

Speaking with The Canadian Press, Victor Adesanya, vice president of insurance at DBRS Morningstar, made note of how the Atlantic region faces a high risk of storm surge events occurring after hurricanes or similar storms.

Nadja Dreff, DBRS Morningstar’s senior vice president and head of Canadian insurance, added that the risks brought by flooding and storm surges are only increasing with climate change.

“There is very much a need for this coverage,” said Dreff. “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.”

The Co-operators stands out as the only insurance company providing storm surge coverage to all Canadians, regardless of their risk level. However, there is still lower uptake in higher-risk areas. While 80 percent of The Co-operator’s clients are covered for storm surges, only 60 percent of clients in Atlantic Canada have such coverage, according to Laidlaw.

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

Acknowledging these insurance gaps, the federal government has pledged to establish a low-cost national flood insurance program aimed at protecting households at high risk of flooding and lacking adequate insurance coverage.

As outlined in the federal budget, the government has allocated $31.7 million over three years for program, starting in 2023-24. This would include offering reinsurance through a federal Crown corporation and a separate insurance subsidy program.

What are your thoughts on this story? Feel free to comment below.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!