Study shows Canada is underinsured against floods

By: Vin Heney on June 16, 2016

In a report titled “The Road to flood Resilience in Canada” Swiss Re highlights the shortcomings of Canada’s insurance industry against the country’s main property risk: flooding.

The report looks at the potential impact of a 1-in-200-year loss event as well as the increasing frequency of flood events in general. The Canadian Underwriter report includes an excerpt from the full report looking at potential economic loss and the insured loss in each province. 

With total economic loss of $13.8 billion and insured loss of $5.7 billion, insurance companies will only end up covering about 41% of damages on average across the whole country. That translates to billions of dollars coming out of taxpayers pockets as well as expensive repercussions to insurance premiums. For an example look back to the 2013 Alberta floods. They caused $5 billion in economic losses while insured losses totalled just $1.9 billion.

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.