Rob Wesseling is president and CEO of The Co-operators, a national insurance and financial services organization.
In the wake of widespread spring flooding, heavy rains and high water levels now threaten more of the same in communities across the country. And while floodwaters inevitably recede, the financial and emotional fallout will continue to make waves.
In the past decade, insured losses from natural disasters, of which floods are the most common example, have more than doubled. In this new reality, our role as insurers continues to be put to the test and rightly so. Today, in the context of a rapidly changing climate, we have a much larger role to play. Insurers and all levels of government must do more to prepare Canadians for the new normal of risk in this country, while ensuring they are well-equipped to adapt to a changing climate.
With respect to floods, the data points to an alarming trend: Costs now exceed a staggering average of $1-billion a year. Once-in-a-century floods are occurring with greater frequency and severity and current responses to this trend, by insurers and governments alike, are falling short.
Until 2015, Canada was the only G7 nation without available residential insurance protection for overland flooding. This unmet need led my company to develop a comprehensive flood product that covers all clients, regardless of their risk. With this coverage now in Ontario and Alberta, we have much further to go to make it available to all Canadians.
In 2014, The Co-operators hosted a multistakeholder roundtable that identified three "winning conditions" as precursors for flood resilience:
1. That Canadians understand the risk flooding presents to their homes, businesses and communities.
A recent study by Partners for Action and the University of Waterloo found that 94 per cent of Canadians living in flood zones are unaware of their risk. This is in stark contrast to the knowledge held by insurers and government. As insurers, we share the responsibility to educate, prepare and equip Canadians to adapt;
2. That Canadian decision makers use their understanding of flood risk to make sound adaptation decisions.
Once aware of the risk, it is up to decision makers to base policies, planning and regulatory decisions around adaptation to extreme weather and natural disasters. This will require the courage to make sometimes unpopular, yet necessary, decisions surrounding land use and development;
3. After they have engaged in adaptation, Canadians must have access to means to transfer the remaining risks associated with flood damage.
All Canadians must have products available to them that appropriately transfer the risk to insurers and government. In some cases, premiums will be high; pricing risk appropriately is necessary to send a clear, monetary signal to clients, municipalities and governments that more needs to be done.
The success of these three conditions hinges on collaboration across sectors and party lines, from governments to insurers to individuals living in flood zones.
First, as insurers, we are accountable. We challenge our industry to raise awareness of the issues, equip Canadians to adapt to flood risk and actively engage with all levels of government. Further, we must innovate and adapt products to ensure all Canadians are eligible for insurance at prices that reflect the risk they are exposed to.
We challenge municipalities to publicize flood maps to ensure citizens have the ability to make informed decisions, restrict development in known flood-prone areas and to put in place regulations, such as building codes that promote and incentivize permeable landscaping or the installation of backwater valves, to adapt to risk.
We challenge provincial and federal governments to more proactively manage risks that Canadians and their communities are exposed to, communicate clear, national guidelines about which flood losses are covered and, together with municipalities, support the creation of more detailed flood maps and continued investment in resilient infrastructure.
Finally, for Canadian consumers: Ask your insurer and government representatives how they are responding to these challenges. Take steps to understand and adapt to your own flood risk and inquire about the risk or history of flooding when purchasing a home. Seek out local flood maps and look into what insurance is available to protect your financial security. Collectively, it's time we meet these headwaters head-on.