Climate Change and Flooding Event

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Climate Change and Flooding

In recent years we have seen first hand the effects of climate change as the Greater Toronto Area, including Markham, Thornhill, Richmond Hill, Vaughan and the rest of York Region as well as Peel and Durham have been affected by high water levels and flooding.

And while flooding isn’t the only hazard associated with climate change (wildfires and storms also come into the mix), it has proven to be the most costly one in terms of insurance claims and increased premiums.

In fact, according to a report from the Intergovernmental Panel on Climate Change, climate changes pose the biggest risk for insurers. Natural disasters in Canada have resulted in catastrophic losses exceeding $1 billion annually from 2010 to 2019 according to the Insurance Bureau of Canada (IBC) with water damage claims now being the most frequent (more than 50%).

According to the IBC, the average cost of replacing a flooded basement is $43,000, so you can imagine how costly the combined insurance claims are when there is a large-scale flood. In the 2017 Montreal floods, for example, there were over 200 homes that experienced flooding.  

Factors contributing to increased flooding
Although important, climate change is only one factor that has resulted in increased instances of flooding across the country. There is also a loss of natural infrastructure, aging homes, and finished basements to consider.

Together these factors have resulted in a 20-25% increase in home insurance premiums as reinsurers have evaluated Canada as being at high risk for flooding.

Over the course of years and decades, our natural infrastructure has been paved over to create suburbs – or it has been transformed into agricultural land. In both circumstances, it means that water cannot absorb as easily into the ground. The result is flooding and the property damage that often comes with it. Since water will always go to the lowest point that it can find, it frequently ends up in people’s basements.

Aging municipal infrastructure also has a role to play in the rising costs of insurance, as it is often underbuilt and inadequate to deal with the increased levels of runoff.

Insurance for overland flooding
Because of the high risk of flooding throughout much of Canada, many insurers have been reluctant about insuring against overland and coastal flooding in their base policies. This is particularly true in urban areas where existing stormwater infrastructure makes it difficult to predict where a flood might start.

Insurance for overland and coastal flooding may be purchased as a rider on many policies however this comes at an additional cost.  Nevertheless, as more homeowners grow concerned about the increased possibility of their homes being flooded, we find there are more and more willing to take on the extra premiums to get the protection they need.

Conclusion
While a single storm or flood may not be able to be empirically linked to climate change, the increase in magnitude and frequency of these events provides clear evidence of the impact that climate change is having on our lives. And combined with other factors that make us more vulnerable to flooding, the result is rising insurance costs.  

Is your home insured against risk of flooding and other damage related to climate change? For a consultation, call the Insurance Brokers at ICD Insurance today.