There is a huge gap in the insurance market when it comes to providing flood coverage, and that has been emphasized by a report from Swiss Re. A study titled “The Road to flood Resilience in Canada” suggests that the insurance industry needs to catch up because the country is underinsured for floods.
Indeed, the report says the main risk for Canadian properties is flooding. In the study, Swiss Re assesses the potential impact of a 1-in-200 year loss event, a massive climate event that could profoundly impact the industry.
Such an event could lead to an insurance loss of $5.7 billion from a total economic impact of $13.8 billion, the report postulates. Insurance companies will only be able to make up 41 per cent of the damages, which means the government would have to foot the bill for the remainder. Of course, the government paying means the taxpayer is really paying.
An event of this scale would also have big repercussions for the premium markets, with home insurance prices certain to go up in such an instance. The recent Fort McMurray wildfire is an example of a 1-in-200 year event, it resulted in a $4.6 billion loss and the impact will be felt by insurance companies and customers alike.
Swiss Re says it used a probabilistic flood model that could accurately assess the risk of flood disasters and measure their impact on the economy and insurance industry.
Swiss Re’s report features a probabilistic flood model for accurately assessing risk of natural catastrophes as well as several measures that could be taken to mitigate flood loss. While flood coverage is slowly increasing in availability there is clearly lots of room for improvement when it comes to making sure insurance is doing its job of protecting Canadian citizens and businesses from natural perils.