Flooding and Natural Disaster Management: Tackling the Insurance Gap

Thomas Gendron, Director, Government Relations & Strategy, Impact Public Affairs

Natural disasters are a significant problem for many regions of Ontario, and the frequency of occurrences is increasing year over year. Last year, 25 communities across the province were forced to declare a state of emergency due to flooding causing a significant risk to homes, businesses, and infrastructure, according to the Government of Ontario. Floods—the costliest natural disaster in terms of property damage—can be caused by commonplace occurrences such as melting snow and ice, high lake or river levels, heavy rains, and thunderstorms. Despite the frequency and threat to hundreds of municipalities, many Ontarians lack the coverage necessary to weather a sudden natural disaster financially.

Nationally, flooding causes approximately $1.5 billion in damages to households, property, and infrastructure annually. Unfortunately, $800 million (53%) of this amount is entirely uninsured loss, and residential property owners bear an estimated 75% of these costs. The obvious question is why wouldn’t a homeowner living in a flood-prone area have coverage in the event of a flood?

Water-related claims are currently the primary cause of home insurance losses in Canada, and these losses are expected to rise in the coming years. Due to the risk and cost, homeowners in the highest flood risk areas cannot get coverage, which causes a gap in coverage. As a result, approximately 90% of Canada’s residential flood risk areas are uninsured.

In response, the Canadian government has committed to developing a low-cost national flood insurance program for high-risk homeowners who cannot obtain coverage. Other measures are being implemented in tandem, including:

Completing all flood maps across Canada

Providing interest-free loans to homeowners for climate change mitigation or adaptation improvements to their home

Promoting flood risk awareness through online public portals

Implementing specific measures to improve flood mitigation in at-risk communities

Examining flood risk for First Nations communities who are disproportionately affected by floods due to aging or less thorough infrastructure

In addition to the federal initiatives, the Ontario government is committing itself to further protecting homeowners from the devastating effect of floods. The Disaster Recovery Assistance for Ontarians plan (DRAO) allows applicants to receive up to $250,000 to replace essential clothing, appliances, and supplies lost in the event of a flood. 

On February 3, Ontario released the Provincial Emergency Management Strategy and Action Plan, outlining the direction of future disaster management and mitigation strategy. Like the federal strategy, the province seeks to mitigate disasters before they occur by proactively planning for and mapping future disaster risk. 

Ontario’s Minister for Emergency Management, Prabmeet Sarkaria, signals that Ontario is aware of the gap in coverage leaving most high-risk flood regions vulnerable, and a comprehensive plan is necessary to effectively tackle the challenge. Federal and provincial commitments to mitigate and assist in the event of a natural disaster are necessary programs, but they’re far from providing a comprehensive insurance plan to fill the gap in coverage. Until a joint comprehensive strategy is created, risk mitigation and climate resilience are the only tools available for Canadians at risk.

Since this article was written, further updates were released by both the Ontario & Federal Governments—a follow-up story will be released in the next issue.

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VOLUME 23 | ISSUE 2