The $31.7 million laid out in Budget 2023 for creating a national flood insurance program is just a first step, experts say, and Ottawa needs to act quickly to get the program into place as dangers rise.
“Obviously it’s just the start. The money that they’ve allocated is to stand up the program, basically to design and get it ready to go,” said Ryan Ness, adaptation research director at the Canadian Climate Institute.
“But the actual delivery of it will require much more time, and much more financial investment as well, to make it happen.”
Experts have long called for a national flood insurance program to be created to offset the costs Canadians face with more severe weather impacting the nation as a result of climate change.
As part of its 2023 budget, the federal government is earmarking $31.7 million over three years to Public Safety Canada and the Canada Mortgage and Housing Corporation to work with the finance department on creating a low-cost flood insurance program.
Its goal is protecting households at high risk of flooding and without access to adequate, affordable insurance, which is often prohibitively expensive.
The work would begin in 2023-24, and would include offering reinsurance — insurance for insurance companies — through a federal Crown corporation and a separate insurance subsidy program for Canadians, the government said.
It did not say when the program would be offered to Canadians, but work with relevant stakeholders on the issue and other evolving climate-related insurance challenges is ongoing.
“We’re hopeful that this could be done in two years, not three. We’ve been at this now for long enough. A lot of the policy work, the thinking has been done, so it’s reasonable to expect that we could stand up a program in two years,” said Craig Stewart, vice president of climate change and federal issues with the Insurance Bureau of Canada (IBC).
“But really, now it’s a call to action for the provinces. They can’t just sit back and wait. Provinces have to get engaged, have to take a look at how they’re going to work to develop the program, co-create it with the federal government and step up to make sure that these Canadians … are protected in a way that they’re not right now.”
Hurricane Fiona, which battered Atlantic Canada last year, demonstrated that the status quo on flood and disaster insurance is not viable for the country’s future, Intergovernmental Affairs Minister Dominic LeBlanc said at the time.
The storm ended up costing at least $800 million in insured damage, according to the Insurance Bureau of Canada. Severe weather in 2022 ended up costing $3.1 billion in insured damage, it said.
Flood and storm surge damage is not covered under most standard insurance plans in Canada, and adding them to existing plans can be expensive for individuals who are at the highest risk.
This is often due to the impacts of climate change, and because work underway across the country to update floodplain maps is placing homes not previously at meaningful risk in newly at-risk zones.
A major report from the federal government in August 2022 warned that the cost of providing flood insurance “will grow faster than inflation and gross domestic product in the future.”
That report is expected to guide work underway on creating a national flood insurance program, which was part of the mandate letter tasks laid out for Emergency Preparedness Minister Bill Blair.
“We’ve got a little bit of work to do,” Blair told reporters on Wednesday morning when asked about the program proposal in the budget.
“With the timing, we’ll work on it as quickly as possible because we do recognize (that) helping people be better protected in the event of flood is really important in this country.”
Flooding causes approximately $2.9 billion in damage to homes and infrastructure each year, and homeowners typically end up bearing about 75 per cent of uninsured loss, the government has said. LeBlanc noted at the time that with the rising costs, insurance providers will become increasingly unwilling to provide flood insurance, but leaving Canadians on their own is not an option.
“The intent is to keep the program evergreen and make sure that as the risk increases due to climate change, that those who are maybe not as high-risk today will be captured by the program and be able to have access to flood insurance in the future,” Stewart said.
“The intent overall is to coordinate a government offering with the private sector offering, so that in essence it’s mandatory for either the government or industry to offer flood insurance to households no matter where they are, and the program will be designed to continue that irrespective of risk level in the future.”
In addition to the national flood insurance program, the government on Tuesday proposed giving $15.3 million over three years to Public Safety Canada for the creation of a publicly accessible online portal where Canadians can access information on their flood risk.
“It’s going to be critically important,” Blair said. “The most important thing is that Canadians understand risk and that they be able to take the steps necessary to protect themselves and their families and their properties.”
Also, it is providing $48.1 million over five years and $3.1 million ongoing to Public Safety Canada to identify high-risk flood areas and implement a modernized Disaster Financial Assistance Arrangements program, which would incentivize mitigation efforts.
The work in those additional programs is expected to begin in 2023-24, but it’s not clear when the portal will be available to Canadians. Blair was asked on Wednesday if it could be up and running by the end of the year, and while he did not clearly answer, he said there is “a strong sense of urgency on this.”
“Flood insurance and financial assistance alone are not going to be the solution to our problem of increasing flood risk under climate change. They’re a good stopgap to make sure that the people who are impacted by flooding and more frequent and severe flooding under climate change get the help they need to rebuild,” Ness said.
“But over time, as a country, as a society, we need to start to move away from these high-risk areas,” he added.
“It needs to be a temporary solution that gets phased out as we move our development, move our neighborhoods, move our communities away from areas of risk.”
— with files from Amanda Connolly