Insurance is not enough: Governments must do better in disaster resilience


Content of the article

THE CONVERSATION

This article originally appeared on The Conversation, an independent, nonprofit source for information, analysis, and commentary from academic experts. Disclosure information is available on the original site.

——

Authors: Anne E. Kleffner, Professor, Risk Management and Insurance, University of Calgary and Mary Kelly, Chair in Insurance and Professor, Finance, Wilfrid Laurier University

The massive flooding in British Columbia in November 2021 demonstrated the devastation that natural disasters can cause in Canada. Prior to 2010, annual insured losses from natural disasters in Canada were rare to exceed $ 1 billion, but today insured losses of $ 3 billion are not uncommon.

Advertising

Content of the article

Canada is expected to become wetter, stormier, warmer, and experience more severe connective storms and wildfires. The Insurance Institute of Canada predicts annual insured losses could reach $ 5 billion over the next 10 years.

Private insurance plays a critical role in supporting the resilience of communities by providing financial compensation for losses that aid in recovery. Insurance company Munich Re notes that after controlling for per capita income, countries with more extensive insurance coverage are more resilient to natural disasters.

However, insurance works best to protect households and communities from low frequency, high severity idiosyncratic events. As extreme weather events become more frequent, relying solely on insurance to protect Canadians from severe weather events is not sustainable. It is essential that an integrated and holistic approach to mitigate and manage losses from natural disasters is developed.

Advertising

Content of the article

Communities and landowners must work together to reduce losses by undertaking mitigation activities to reduce the severity of wind, water and forest fire events. However, the most important role falls to all levels of government in protecting Canadians from the impact of catastrophic weather events.

Land use planning and mitigation

To create more resilient communities, governments need to invest in risk mitigation, adaptation and prevention activities. Climate change, expanding development and population growth have led to the need to update risk assessments, especially up-to-date flood maps.

In high risk areas, future development should be prohibited and governments should buy back existing properties. Better flood maps will allow governments to purchase high-risk properties before a devastating flood, and the land could be transformed to help minimize flooding in adjacent areas.

Advertising

Content of the article

To withstand future extreme weather events, building codes and standards must be revised. Whether it’s new building or infrastructure construction, property renovations or property repairs after a disaster, building codes need to look to the future.

Disaster insurance and financial assistance

After an extreme weather event, a province or territory may declare the event eligible for disaster assistance, with funding available from the province through Disaster Financial Assistance (DFA). DFA is available to landowners and communities for losses that are not covered by insurance companies – DFA does not pay for losses for which insurance is “reasonably and readily” available.

Prior to the floods in Calgary and Toronto in 2013, Canadian homeowners could not purchase surface water damage insurance, but most insurers now offer some level of flood insurance, except in those areas. very high risk areas.

Advertising

Content of the article

This introduces inequalities among homeowners – those who live in high-risk areas cannot purchase insurance and therefore can benefit from AFD after a disaster, but those who live in moderate to high-risk areas where l Insurance that is “reasonably and readily” available may not be able to afford coverage and therefore not be eligible to receive DFA.

Since the term “reasonably and easily” is not well defined, there is some ambiguity as to who can receive AFD and who cannot. If the limitations surrounding DFA are not fully understood by landowners, or if governments do not clearly define “reasonably and easily,” the incentive to purchase flood insurance is reduced.

Property owners need information on the value of purchasing flood insurance, and insurers can provide important information on how to mitigate flood losses.

Advertising

Content of the article

In addition, homeowners must be very carefully counseled on the consequences of not purchasing flood coverage, and provincial and territorial governments must remain determined not to pay DFA for losses that could have been insured.

Public-private partnerships

The private insurance market, which has an important role to play in financing losses from natural disasters, has its limits. The risks associated with some properties exceed the appetite of insurers and some risks may result in losses too great for the Canadian insurance market to cover.

To achieve sustainable flood insurance coverage, a public-private partnership is needed, in which the role of government is to support an insurance risk-sharing pool for high-risk properties that would otherwise not be not able to buy blanket. This will help reduce reliance on DFA and provide information to homeowners regarding the risks they face.

Advertising

Content of the article

Governments also have an important role to play in providing a safety net for very large losses. The industry’s guarantee fund, the Property and Casualty Insurance Compensation Corporation, has determined that a catastrophic loss exceeding $ 35 billion in insured losses will overwhelm the Canadian insurance industry and require government intervention. Such intervention could take the form of a layer of insurance coverage for catastrophic losses, or a liquidity or solvency safety net.

In the end, insurance and accommodation will not solve the problem of bad weather claims. We must commit to taking sincere and forceful action on climate change to reduce the frequency and severity of weather events. Some of the tools discussed here – insurance, tightening building codes, effective mitigation, and creating public-private partnerships – can be harnessed to build a more resilient society.

——

Anne E. Kleffner receives funding from SSHRC, Alberta Finance.

Mary Kelly receives funds from SSHRC and is a director of Heartland Farm Mutual Insurance Company.

——

This article is republished from The Conversation under a Creative Commons license. Disclosure information is available on the original site. Read the original article: https://theconversation.com/insurance-isnt-enough-governments-need-t https://theconversation.com/insurance-isnt-enough

Advertising

comments

Postmedia is committed to maintaining a vibrant but civil discussion forum and encourages all readers to share their views on our articles. Comments may take up to an hour of moderation before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread that you follow, or if a user that you follow comments. Check out our community guidelines for more information and details on how to adjust your email settings.