Urban Flood Risk and Insurance - Credit Valley Conservation · Urban Flood Risk and Insurance Dan Sandink, MA, MScPl Manager, Resilient Communities & Research Institute for Catastrophic

Urban Flood Risk and Insurance

Dan Sandink, MA, MScPl

Manager, Resilient Communities & Research

Institute for Catastrophic Loss Reduction

CVC – November 4, 2013

What is ICLR?

• Founded in 1997 by Canadian P&C industry

• Current focus on:

• Urban flooding, wildland fire, wind, earthquake

• Key risk reduction avenues: Infrastructure, land-use

planning, home retrofits and new homes

• Multi-disciplinary

• Engineering, climatology, seismology, economics,

political science, geography, planning

0%

20%

40%

60%

1970 1980 1990 2000 2010 2020

Proportion

of fire

claims

Proportion of water

and wind claims

Trends in homeowner claims—1970 to 2009 (Canada)

Source: ICLR based on data from IBC

• Mississauga, Brampton, Toronto,

2013: >$850 million

• Thunder Bay, Montréal, Ottawa,

Hamilton, Toronto, Steinbach,

2012: >$350 million

• Hamilton, 2009: $100-150 million

• Southern Ontario, 2005: >$500

million

• Peterborough, 2004: $87 million

• Edmonton, 2004: $166 million

• MANY OTHERS!

Recent large loss events - homes

IBC, 2012: $1.7 billion average insured water

damages per year in Canada

Southern Alberta, 2013: $1.7 billion –largely commercial,

with significant home (SB) losses

Large payout events

2

2

3

3

4

15

27

40

44

47

0 10 20 30 40 50

Wildfire

Icestorm

Ice, freezing

Snow, snowstorm

Hurricane

Tornado

Storms (tropical…

Hail

Wind

Flood & Rainstorm

IBC, 2000; 2008; PCS, 2013

Large Payout Events by Hazard, 1983-2006; 2009-2012

Overland flood not insured for

homeowners

Average water damage claims

Province Increase:

2002-2012

British Columbia 154%

Ontario 136%

Alberta 109%

NFLD/Labrador 107%

Quebec 84%

Nova Scotia 61%

New Brunswick 50%

National average 117%

Source: Aviva Canada, 2013: http://www.avivacanada.com/press/nearly-40-cent-all-home-insurance-claims-are-result-water-damage-

aviva-canada-data-shows

• 2002 average: $7,192

• 2012 average: $15,500

• Use of basements as

living spaces

Retrofit measures

Windows, Window

Wells

Seal Cracks

BW Valve Lateral inspections, repair

Maintain Eavestroughs, Down

Spouts

Down Spout Disconnection,

Splash Pads

•Lot grading, Swales

•Backfill Capping

Foundation Drain, Sump

Regional SB risk reduction

Isolated SB

risk reduction

Behavioural measures

43%

11%

45%

1%0%

10%

20%

30%

40%

50%

60%

n=674

Yes No Don't Know No Response

Do you have insurance coverage for sewer backup (Sherwood Forest, London, Ontario)?

• Report flood events, details to municipality

• Many report only to insurance, or to no one

• Discuss insurance coverage with provider

• Talking to municipality about acceptable risk reduction measures – based on home, subdivision

• Conduct plumbing investigation, have proper inspections performed

Insurers

• Financial measures

• Limit financial exposure through:

• Caps, availability

• Mitigation measures

• Policy holder education

• Incentives

• Caps, availability, premiums

• For education, brokers are often on the “front lines”

No claims, no

mitigation: $170/year

With mitigation:

$120/year

1 claim, no

mitigation: $350/year

With mitigation:

$170/year

Insurance incentivesNo claims, no

mitigation: $50/year

With mitigation:

$40/year

1 claim, no

mitigation:

$110/year

With mitigation:

$50/year

Many insurers, many approaches

May also affect: deductibles, caps, availability

2 events in 5 years, 3 in 10 years

Risk areas frequently based on FSA, postal code

Mitigation measures

13%

54%

32%

1%0%

10%

20%

30%

40%

50%

60%

Yes No Don't know No response

Do you have a backwater valve in your home?

n=674

• Many insurers focus on backwater valves and/or sumps only

Conclusion

• Water damage a major driver for P&C insurance

claims

• Many insurers incentivizing mitigation measures

• Incentives provided by different insurers are not

uniform

• Incentivized measures might be too uniform

• Important role of brokers

• Focus of mitigation, education is on sewer

backup only

• Policy holder insurance issues will depend on

risk reduction by all players

[email protected]