Flood Insurance in Canada: Implications for Flood Management and Residential Vulnerability to Flood Hazards

Environmental Management (2015) 55:603615 DOI 10.1007/s00267-014-0416-6

Flood Insurance in Canada: Implications for Flood Management and Residential Vulnerability to Flood Hazards

Greg Oulahen

Received: 4 July 2014 / Accepted: 28 November 2014 / Published online: 21 December 2014 Springer Science+Business Media New York 2014

Abstract Insurance coverage of damage caused by overland ooding is currently not available to Canadian homeowners. As ood disaster losses and water damage claims both trend upward, insurers in Canada are considering offering residential ood coverage in order to properly underwrite the risk and extend their business. If private ood insurance is introduced in Canada, it will have implications for the current regime of public ood management and for residential vulnerability to ood hazards. This paper engages many of the competing issues surrounding the privatization of ood risk by addressing questions about whether ood insurance can be an effective tool in limiting exposure to the hazard and how it would exacerbate already unequal vulnerability. A case study investigates willingness to pay for ood insurance among residents in Metro Vancouver and how attitudes about insurance relate to other factors that determine residential vulnerability to ood hazards. Findings indicate that demand for ood insurance is part of a complex, dialectical set of determinants of vulnerability.

Keywords Flood Insurance Flood management

Vulnerability Hazard Metro Vancouver

Introduction

Flood risk poses a unique and complex challenge in Canada. Floods are by far Canadas most frequent natural disaster; over the last decade alone they have caused

billions of dollars in damage and directly affected hundreds of thousands of people (MMM 2014; PSC 2014). Municipal and provincial governments have long and proud traditions of managing land use in ood-prone areas and building infrastructure to reduce ood risk. Provincial and federal governments have responded to ood disasters with nancial assistance for communities and citizens affected by ood losses. The Canadian property and casualty (P&C) insurance industry nds itself in a complicated role in this challenge; it is, in essence, neither here nor there. Insurers do not provide coverage against overland ood damage to homeowners in Canada. Despite this exclusion, water damage has become the principal source of claims for insurers, surpassing re and theft combined (KPMG 2014). This profound shift in claims is causing the industry to reevaluate its...