Swiss Re has said it is to launch a discussion paper to look at the ways in which flood insurance can be provided for homes in Canada.
The study entitled “Making Flood Insurable for Canadian Homeowners,” has been released by the Institute for Catastrophic Loss Reduction (ICLR) and supported by Swiss Re, and outlines the steps and solutions to resolve the problem of Canadian homeowners being unable to purchase insurance for overland flood damages.
At present, homeowners in Canada cannot purchase overland flood insurance and instead are left to rely on government-provided financial assistance programs after flood events.
The report concludes flood insurance has many advantages over government relief programs. Insurance companies already have well-established methods for assessing and paying claims, which can result in a faster recovery. Risk based premiums and deductibles can also provide incentives to encourage actions to reduce flood risk.
“Canada is the only G8 country where flood insurance is not available to homeowners. With other forms of water-damage being covered, such as sewer backup and burst pipes, and with commercial entities being able to purchase flood insurance, the coverage void tends to confuse – even anger – homeowners when they discover that they are not covered after a flood event,” said Paul Kovacs, executive director of the Institute for Catastrophic Loss Reduction.
He added: “The provision of flood insurance for Canadian homeowners will put Canada in line with most other industrialized countries, and end any confusion that exists with regard to water-damage claims.”
The paper advocates a partnership between the insurance industry, government and private homeowners. Additionally, it explores historical flood damages in Canada, current flood management practices at the national level in Canada and flood management practices for four case study provinces: Ontario, Quebec, British Columbia and Alberta.
“One of the biggest barriers to implementing flood insurance in the Canadian market so far has been adverse-selection. What the report demonstrates is how to overcome this barrier by bundling flood insurance into homeowner insurance policies that cover other perils such as fire or theft,” explained Sharon Ludlow, President & CEO, Swiss Re in Canada. “The bundling approach has been in place in the U.K. for the past fifty years and, as the findings of this report show, is the best suited model for Canada."