According to the Government of Canada website, flooding in Canada has resulted directly and indirectly in the deaths of at least 198 people and over several billion dollars of damage during the 20th century. The most costly flood in Canada was the May 1950 flood disaster in the Red River valley, southern Manitoba. Emergency Preparedness Canada estimated that damages from that flood amounted to about CAD$1.093 billion (1999 dollars). From 1975 – 1999, 63 floods resulted in payment of almost CAD$720 million in 1999 dollars through the Federal Government’s Disaster Recovery Financial Assistance Arrangements Program.
Flood in Canada is not considered an insurable risk. The reason is simple -- insurers believe that most areas prone to flooding will eventually succumb, says the Insurance Bureau of Canada’s vice president of policy, Barbara Sulzenki-Laurie.
As a result, flood insurance for homeowners is not available in Canada either through private or government programs. “Moreover, flood insurance would only be of interest to a relatively small population of people living in areas prone to flooding, thereby defeating the basic principle of insurance that the premiums of a many people pay for the losses of a few,” Sulzenko-Laurie said.
Some Water Damage is Covered
In Canada, property & casualty insurers do cover losses due to water damage through their homeowners’ policies. There are several types of homeowners’ insurance polices that individuals can purchase: basic, standard, broad and comprehensive.
Coverage usually include damage arising from sudden and accidental escape of water from indoor plumbing, heating, sprinkler, or air-conditioning systems; or damages caused by the malfunctioning of a domestic appliance, such as waterbeds or washing machines; or from a domestic water main. Homeowners can also, in most instances, purchase sewer back-up coverage to supplement their existing homeowners’ policy but this would exclude overland flows, Sulzenko-Laurie said.
Leaking Basements a Significant Problem
There is little accurate information about flood-prone areas in Canada. “There are no comprehensive flood-prone area maps available in Canada, therefore insurers are unable to assess risks appropriately,” Dan Sandink, from the Institute for Catastrophic Loss Reduction (ICLR) says. Any flood maps that do exist are confined to riverine flooding, Sandink, who is manager, resilient communities and research at the institute, says.
Of equal, if not more, concern to insurers these days is urban flooding, which is comprised of overland flooding (not insured) and sewer backup, which is increasingly becoming an insurable option. In fact, the insurance industry’s biggest source of losses is sewer backup, Sandink explains.
Sandink authored a 2008 study which showed that basement flood damage cost governments, homeowners and insurance companies millions of dollars each year. In the August 2005 flood, severe rainfall and an urban flooding event in the Greater Toronto Area caused extensive overland flooding and sewer backup damages, resulting in the costliest storm damage in Ontario’s history. It cost more than CAD$400 million in damages, and is considered one of the largest insurable losses in Canada’s history. Royal and Sun Alliance reported that the average claim was for CAD$30,000, compared to a CAD$15,000 average from the Peterborough flood of the year before.
The average sewer backup claim from the Toronto 2005 flood was CAD$19,000, compared to the usual CAD$3,000 to $5,000. Previous estimates for total yearly claims for basement flooding were CAD$140 million. However, sewer backup claims from the August 2005 flood hit CAD$247m. There were 13,011 sewer backup claims.
A 2002 study on basement flooding showed that the main reason for the high cost of basement flooding was due to locating expensive property in basements, like televisions, computers and entertainment centres.
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