Sept. 22, 2022 — CANADA’s task force on flood insurance and relocation has stressed that ensuring Canadians are not left underinsured for their risk should be an important consideration for the design of any insurance model.
Its report, titled ‘Adapting to Rising Flood Risk: An Analysis of Insurance Solutions for Canada,’ was developed over nearly two years by an interdisciplinary task force on flood insurance and relocation.
The report is designed to support decision-making for creating a national flood insurance program, with special considerations for potential strategic relocation of those at most risk.
The researchers found participation is a key concern.
The task force said a carefully designed flood insurance solution can ensure better protection for Canadians, help to share the costs more broadly and provide incentive for risk reduction.
But it warned that if such a solution is to replace government financial assistance for residential flood risk, maximizing participation in the insurance arrangement through affordability measures, incentives or mandates will be critical.
Without these interventions, the task force said, barriers to insurance will remain — leaving more risk on vulnerable Canadians and people living in high-risk areas.
The task force said greater public intervention can more fully close protection gaps, but at a cost.
It noted that costs paid by governments are aimed at achieving higher participation rates and increasing affordability.
It said that while these costs viewed in isolation may seem high, they must be compared with the alternative scenario: the costs otherwise fall to public programs or on the shoulders of un- or underinsured homeowners.
The researchers said there is no scenario in which these costs disappear without significant investments to remove — or reduce — the risk.
Relocation can be a powerful risk reduction tool, the task force said in the report.
It said relocating the highest-risk and repetitive-loss properties removes risk rather than transferring or mitigating it and can be effective in improving overall viability and lowering the costs of insurance options.
At the same time, it said, the practicality of relocation in areas already experiencing a shortage of available and affordable housing would require considerations for in-place mitigation measures.
The task force also said relocation must be informed at the community level. It noted that despite the clear risk-reduction benefits, relocation is highly complex and can have major impacts on households and communities.
The decision is especially significant for Indigenous communities with strong ties to their ancestral, traditional land, the researchers said. They said it is important to address how to apply relocation early and ensure that the process offers communities and affected residents the opportunity to provide input.
That, they said, would increase their sense of agency and trust in the process.
Affordability of flood insurance premiums is key to enabling equitable access, the task force said.
It said that without supports for socio- economically disadvantaged groups, any program where insurance is optional will likely exacerbate their exclusion and marginalization.
For mandatory insurance models, it said, consideration must be given to individuals and communities for whom insurance may not be an appropriate solution.
The task force noted that targeting affordability measures where they are needed most can be complex and it said considerations of feasibility should factor into the design of a flood program.
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