More Canadian homeowners are purchasing overland flood insurance, but many people living in higher-risk areas – including B.C. communities located on floodplains or those devastated by flooding last fall – do not have such protection because it is not an option for them, is too expensive or because they simply do not know that their properties are at risk of flooding.
Bohan Li, an economist at the Institute for Catastrophic Loss Reduction (ICLR), analyzed overland flood insurance take-up data from Catastrophe Indices and Quantification Inc. (CatIQ) and found that the number of policies sold nationally, measured as a fraction of personal fire insurance take-up, increased from 38 per cent in 2018 to 54 per cent in 2021. The take-up rate in B.C. mirrored the national figures, at 38 per cent in 2018 and 55 per cent in 2021.
“It seems like the trend is in a good direction outside of the high-risk areas and it might, hopefully, continue going up,” Dr. Li said. “But we have to say that, anecdotally speaking, for high-risk areas, flood insurance is still very hard to find.”
For residents in those areas, the federal government is preparing to release details of a low-cost, national flood-insurance program, as well as relocation options for people living in homes at the highest risk of recurrent flooding.
Overland flooding refers to damage caused by freshwater sources such as rainstorms and overflowing rivers. Many traditional home insurance policies may cover water damage from burst pipes or sewer backups, but not overland flooding, for which personal insurance only became available in Canada in 2015.
Rob de Pruis, the national director of consumer and industry relations for the Insurance Bureau of Canada, said there are more than a dozen companies in B.C. offering overland flood insurance and only about 4 per cent of properties are considered ineligible.
“But having said that, 4 per cent is hundreds of thousands of properties, when we look at all of the properties in the province, and these properties are typically in high-risk flood-hazard areas or in floodplains – just like the ones that were impacted by the atmospheric river event,” he said.
Last November’s catastrophic rainfall in Southern B.C. led to mudslides and flooding that severed highways, displaced almost 15,000 people and killed hundreds of thousands of farm animals. CatIQ estimates insured damage will reach $675-million, making it the largest insured loss event in the province’s history and the ninth-largest in Canada.
Mr. de Pruis said about two-thirds of those claims were for residential properties and about a third were for commercial properties, with the vast majority of insurance money going to the latter.
Dr. Li noted that metropolitan forward sortation areas (FSAs) – geographical areas determined by the first three characters of their postal codes – generally had higher take-up rates than rural FSAs. But he noted that FSAs in Richmond and Delta – both located on the Fraser River floodplain – had much lower rates than other cities.
“In Ontario and Alberta, in the major metropolitan areas, take-up rates are sometimes hitting 70, 80, 90 per cent in certain FSAs,” he said. “That doesn’t seem to be the case in B.C. … Within the Richmond and Delta areas, take-up rates are actually relatively low, in the 30- to 40-per-cent range.”
Mr. de Pruis said this may be because overland flood coverage is limited and more costly for homes in high-risk areas. But low take-up rates may also be attributed to a lack of awareness, as there is no single, comprehensive flood map that homeowners can easily check to see if their homes are in such an area, he said.
A 2020 survey by Partners for Action, a research initiative based at the University of Waterloo that is advancing flood resiliency, found that of 2,500 Canadians living in designated flood-risk areas, only 6 per cent were aware they were living in such areas. That figure had not changed since the group’s first survey in 2016.
A national task force struck to examine responses to the growing threat of flooding is expected to develop Ottawa’s flood-insurance program, relocation options and a comprehensive flood mapping system.
Annie Cullinan, press secretary to Minister of Emergency Preparedness Bill Blair, said the final report on those initiatives is expected in the next few weeks.
Between 1983 and 2008, the insurance industry paid out an average of $422-million annually in severe-weather claims, Mr. de Pruis said. In the past decade, that has soared to about $2.1-billion.
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