Flood backstop, check. Now, what’s the industry’s next agenda item?

Now that Canada has introduced a commitment to a backstop for high-risk flood insurance, the next item for change should be an government earthquake backstop, a panellist noted at the the Insurance Institute of Canada’s Symposium in Toronto Wednesday. 

Arguably, quake probably should have come first, suggested Maz Moini, co-founder and managing partner at NovaRisk Inc. However, with a long-awaited national flood insurance program now in place, it’s time for the industry to move the needle on the dial for a solution to high concentrations of earthquake risk.   

“We’re at a point now in 2023 where the government has moved on one, but hasn’t moved on the other,” Moini said, “And arguably the one they haven’t moved on is the biggest. Because the industry balance sheet as a whole, if you include reinsurance, is about $30 billion to $40 billion. But we know if the Big One hits in B.C., the losses are well in excess of $20 billion to $30 billion, and the government has known that for the past decade, because we told them.  

“We’ve done our part to raise the issue, quantify it, and also propose solutions to the government. But what we haven’t done well is keeping the heat on the [file] to make sure the government’s actually done something about it.” 

In its 2023 budget, the federal government committed $31.7 million over three years to protect households at high risk of flooding and without access to adequate insurance. 

“I was involved with that work when it started,” Moini said of the government’s work to address high-risk flood zones. “Now, take the risk that flood poses and multiply it with all the other systemic risks that we face as an industry. We’ve got other atmospheric risks, climate change, major earthquake exposures on both sides of the country, major cyber risks and inflation risk.

“How fast are we mobilizing the whole of society and mobilizing the local government — that has influence on these things — to actually do something about these problems?” Moini said. “If it takes us [that much effort] to move that one [flood] file forward, are we actually moving fast enough?” 

Moini suggested it’s not a matter of motivation, but a matter of pace. Both flood and earthquake pose major threats to the P&C industry — and the Canadian economy — yet movement has only occurred for one risk. 

“There are some changes that we cannot reasonably respond to [proactively],” Moini said. “It just comes out of left field, and you have to just sit back and respond to it at that point in time. But there are other changes that you should definitely be proactive about. It’s not necessarily that we’re not proactive, but we’re too slow at pushing [for societal solutions to climate risks] with government.” 

Being proactive in this area is crucial because the confluence of risks the industry is currently addressing all at once can slow down reaction time when a catastrophe occurs.

Feature image by iStock.com/coldsnowstorm