Critics seek new financial system to bail out homeowners
In many regions in the United States, residents who live in areas identified as flood zones must pay into government insurance schemes to help cover the costs of flood damages.
In the wake of some of the most serious flooding to hit southern Quebec in the last century, and with the cost of government relief for severe weather rising precipitously over the last 20 years, many are pushing for a similar system in Canada so taxpayers are not caught footing the bill for people who choose to live in at-risk areas.
Canada is the only G7 country that doesn’t have a national flood program, the Insurance Board of Canada has noted.
Under Quebec’s disaster relief program, homeowners can claim 80 per cent of the cost of repairing damages or replacing their home, up to a maximum of $159,000.
CAA-Quebec’s home insurance department notes that most contractors put the cost of rebuilding a room or home at between $150 and $200 a square foot. Replacing a 1,500-square-foot home would cost between $225,000 and $300,000, leaving the flooded homeowner on the hook for as much as half that cost.
“We now have, in Canada, a growing uninsurable housing market where people simply do not have insurance coverage for flooding,” University of Waterloo professor Blair Feltmate, leader of the Intact Centre on Climate Adaptation, told Postmedia News. “It makes those homes a ticking time bomb.”
The average homeowner had to pay out $42,000 to fix basement damage after the flooding of 2013 in Toronto and Calgary, most of which was paid out of their own pockets. Those types of costs could lead many to default on their mortgage, he said, threatening the country’s entire mortgage industry.
Private insurance for flooding caused by overflowing rivers or lakes, referred to as “overland flooding,” is only about a year old in Canada, and relatively rare.
Only a few insurance companies started offering it in Quebec as of last March, at a premium, and it would not be offered to anyone in a zone designated high risk.
On Wednesday, Quebec Premier Philippe Couillard said the government was looking into the question of whether the $159,000 limit needs to be increased. The government raised the limit from $100,000 to $150,000 in 2011 during the Richelieu Valley floodings.
Those floods cost the federal and provincial governments $52 million in payouts for the 2,535 principal residences that required disaster relief. Under Canada’s Disaster Financial Assistance Arrangements programs, which reimburses provinces for natural catastrophes, the province pays for the first several million dollars, based on its population, after which expenses are shared, with the federal government taking on the lion’s share as costs rise. So far, 2,733 principal residences have been listed as flooded during this spring’s disaster, Radio-Canada reported.
A 2016 federal report found that disaster relief for severe weather has risen from an average of $54 million a year between 1995 and 2004 to an average of $410 million between 2005 and 2014, Postmedia News reported. Water has surpassed fire as the leading expense in home insurance payouts. Aging municipal sewage infrastructure unable to handle increased rainfalls caused by global warming were the main sources of insurance claims, the Insurance Bureau of Canada reported.
According to floodplain maps created by the bureau, 10 per cent of Canadians, or 1.8 million households, are in floodplains or highrisk areas. The bureau is calling for a national flood mitigation strategy, in which the federal government would partly fund higher private insurance premiums for those living in floodplains, lessening the amount it would have to pay out in disaster relief.
Some want even stricter measures. Columnist Scott Gilmore argued in Macleans magazine that federal relief for flooding should be cancelled, and city councils who okay residential zoning in flood zones be required to take out insurance, and homeowners as well.
“Cities will never spend the money to build flood barriers if someone else is always going to bail them out,” he wrote. “If flooding is going to continue to get worse, and if homeowners and cities are aware of this in advance, there is no reason the rest of us should continue to ‘pull together’ and pick up your bill.”
People simply do not have insurance coverage for flooding. It makes those homes a ticking time bomb.