The Desjardins Group’s move to stop offering mortgages in certain Quebec flood zones may be the start of a wider trend in Canada, caution experts, while across the border, states are increasingly shouldering the cost of climate risk by providing “last resort” insurance to homes in hurricane- and wildfire-prone areas.

A major financial institution in Quebec, Desjardins “sent shock waves” through low-lying communities in the zero- to 20-year flood plain—where there is a 5% chance of flooding in any given year—when it announced it would cease new mortgages for properties there as of February 1, reports CBC News.

“The impacts of climate change, including water damage, are growing in importance and causing substantial damage,” said a Desjardins spokesperson.

Homeowners who live in the zone now excluded by Desjardins fear the inability to get a new mortgage will make their homes virtually impossible to sell.

The news comes atop evidence that the average value of homes in flooded areas declined by 8% in the six months following the events, writes CBC, citing [pdf] a 2022 report by the Intact Centre on Climate Adaptation.

“What’s happening in Quebec is an indication of what could potentially happen going forward,” lead author Kathryn Bakos, Intact’s managing director of finance and resilience, told CBC. “It’s very significant, but it is not shocking.”

“We can look to other areas across Canada that we have been driving in this direction for a while now,” Bakos added.

Naming flooding as Canada’s “greatest climate threat,” the Insurance Bureau of Canada is urging the federal government to provide operational funding to its nascent national flood insurance program in the upcoming budget, CBC writes, noting that last year’s budget set aside C$32 million for the program.

But while the program will help, long-term solutions like physical barriers and flood-resistant roads and stricter zoning laws will be needed to ensure that the feds—and by extension, the public—aren’t left “on the hook for huge payouts,” said Ryan Ness, adaptation research director at the Canadian Climate Institute.

In the United States, “homeowners in the most risky places are now more likely to be covered by state-created, “last resort” insurance programs that provide protection where the private market won’t,” writes Bloomberg Green. “Those plans have more than doubled their market share since 2018, and their liabilities crossed the US$1 trillion threshold for the first time in 2022.”

“The most climate-vulnerable states are the most exposed,” the news story states. “As of now, Florida’s plan could suffer $525 billion in losses; In California, it’s at least $290 billion, up sixfold from 2018.”

But state insurance entities have limited options to cover claims: “Levies on private insurers or state residents, or more state borrowing—and none of them are good,” Bloomberg writes.

Worse still, most states are avoiding the question. “Out of 36 residual insurance plans that offer coverage for natural catastrophes, 21 don’t explicitly detail how they’d pay deficits.”

Concerned about the financial health, or lack thereof, of Florida’s last-resort Citizens Property Insurance, U.S. Sen. Sheldon Whitehouse (D-RI) launched a probe into the corporation last November.

Citizens’ policy count “has almost tripled since 2018,” Bloomberg says, noting that state policy-makers have been determined to keep voters happy by keeping premiums artificially low, even in the face of savage hurricane seasons.

Under Florida law, should Citizens’ bubble burst, everyone else with property insurance in the state will be “on the hook” to help bail the residual insurance out, Bloomberg says, adding that historically small assessments can no longer be guaranteed.

“If a Category 5 hurricane hit Miami and the Florida coast, it could cause a staggering $1.35 trillion in damages, more than $60,000 for every person in the state,” the news story states.

Whitehouse’s fear is that Floridians alone will not be able to rescue Citizens, and that the state will turn to the feds for a lifeline.

“If Florida is the leading edge of the predicted coastal property values crash, it could lead to an economic meltdown similar to 2008,” he told Bloomberg.