With payouts for more frequent, severe weather approaching C$1 billion per year, the push is on for the Canadian government to scale back its role in covering disaster recovery costs, while private insurers begin declaring some home in high-risk areas uninsurable.
Federal support “is not going to be forthcoming now to the extent it was because the government is backing out of it,” said University of Waterloo adaptation specialist Blair Feltmate. “So the question is where’s that money going to come from.”
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The attention this week is on the United States, where recovery costs from Hurricane Harvey alone are expected to hit US$150 to $180 billion, CBC notes. “But with bigger and more intense storms hammering Canada because of climate change, it too faces increasing financial pressures. Provinces that in the past relied on Ottawa to cover those costs may find it more challenging to receive disaster assistance.”
Until now, Ottawa has paid for natural disaster damage not covered by private insurance, delivering assistance to homeowners through the Disaster Financial Assistance Arrangements (DFAA). But “federal disaster relief spending rose from an average of $40 million a year in the 1970s to an average of $100 million a year in the 1990s,” the national broadcaster notes, en route to $600 million per year in the first six years of this decade.
“It’s no wonder, then, that in 2015 the government changed the formula for disaster assistance,” writes reporter Mark Gollom. “It reduced the financial responsibility for the federal government, meaning the province would bear more of the costs, and so too would municipalities and homeowners.” Even so, the Parliamentary Budget Office expects annual DFAA costs to hit $902 million.
A related problem is that only 10 to 15% of Canadians are insured for overland floods, many people don’t realize they’re in flood-prone areas—and in some high-risk markets, it’s simply no longer possible to get insurance.
“An uninsurable housing market is evolving in Canada fairly rapidly,” Feltmate said. “Where there’s been repeated basement flooding and risks are now so high, the insurers are simply saying, ‘Look, we can’t offer insurance in those areas for anything that would be a premium that anybody could afford.’”
While Feltmate called for cities to reduce their risk through adaptability, UW Assistant Professor Jason Thistlethwaite said the only realistic alternative to rebuilding in high-risk areas is for governments to buy homeowners out. That’s what happened with about 100 homes caught in the devastating High River, Alberta floods in 2013.
“They realized it’s cheaper to buy out these people and force them to move to a safer area than to pay out for the recovery when the next flood happens,” Thistlethwaite told CBC. “It’s not popular. It’s what the evidence says is the right idea, but it’s not politically popular.”
