Celyeste Power, President and CEO, Insurance Bureau of Canada (IBC), joined Canada’s Minister of Housing, Infrastructure and Communities Sean Fraser, at a Globe FORUM main stage session last month to discuss climate-resilient housing and the National Flood Insurance Program.
The session, moderated by the Canadian Climate Institute President Rick Smith, explored the need to build more housing supply in a climate resilient way while ensuring existing communities are protected from severe weather due to climate change. Power and Minister Fraser discussed the importance of adaptation strategies, including the proposed low-cost National Flood Insurance Program for households at highest risk, to help ensure all Canadians have access to affordable flood insurance, regardless of risk exposure. The Minister agreed that existing disaster assistance programs, including the Disaster Financial Assistance Arrangements (DFAA) is too costly and too slow to effectively support Canadians impacted by an increased frequency and severity of climate-change related disasters.
The property and casualty (P&C) insurance industry has been sounding the alarm on the need to adapt to climate change for over a decade, as weather-related insured damage began to drastically increase from an annual average of $400 million in the mid-1990s to over $3 billion annually in the last two years.
In 2023, Canada experienced its fourth-worst year for weather-related insured losses, highlighting the significant financial costs of a changing climate to taxpayers. For example, an atmospheric-river event in Nova Scotia last summer produced more than 250 millimeters of rain in the hardest hit areas, most of that in less than 24 hours. The downpour led to a provincial state of emergency, four fatalities, significant damage to infrastructure and flooding to homes and businesses, with an estimated $170 million in insured damage. However, due to the limited availability of overland flood insurance in high-risk areas, many of the damaged or destroyed properties were uninsured.
Minister Fraser expressed support for a low-cost National Flood Insurance Program, as well as other adaptation measures including flood mapping, to create a better understanding of where the high-risk flood zones are, and building strategically to keep new infrastructure away from these areas. As Minister Fraser astutely pointed out, “If you think it’s expensive to build it right, try building it twice.”
About 10% of Canadian households are highly exposed to flooding but lack access to flood insurance. The National Flood Insurance Program, delivered through a collaboration between the federal government and the P&C insurance industry, can help provide financial protection for all Canadians, while reducing disaster costs to federal and provincial government treasuries. Most other G7 countries, including the U.K., U.S. and France, already have similar programs in place.
Securing the federal government’s support for a low-cost national flood insurance program is critically important to help protect households at highest risk from significant financial losses. As Minister Fraser noted during the plenary session, the cost of addressing our climate challenges is lower than the cost of living with them, as Canadian tax dollars are already funding the costs of the DFAA program and infrastructure repair. Once a flood insurance program is implemented, a similar government-backed insurance program could be designed to help provide financial protection from loss resulting from other perils, such as earthquake risk, another peril for which many in Canada are uninsured.
Implementing a low-cost National Flood Insurance Program is the most important step Canada can take to help protect households at highest risk today from the financial risks posed by climate change. IBC was encouraged by this positive dialogue with Minister Fraser and will continue to advocate for the program to be supported in the lead up to the Federal 2024 budget on April 16. Addressing Canada’s housing shortage is crucial, but as the government works to increase the supply of new homes, it needs to make sure climate resilience is integral to the process.
