Thank you, Mr. Chair and committee members, for the invitation and opportunity to speak to you at the standing committee today on the subject of disaster mitigation and insurance.
I'm Craig Stewart, vice-president of federal affairs at the Insurance Bureau of Canada, or IBC. We are the national trade association representing Canada's private home, car and business insurers.
Eighteen months ago, after the 2017 floods across eastern Canada, the Honourable Ralph Goodale, Minister of Public Safety and Emergency Preparedness, appointed a national advisory council on flooding, largely embodied by two working groups: one dealing with the financial risk of residential flood, which I co-chair, and another dealing with flood mapping.
Our working group comprises representatives from four provinces, four federal departments, the Federation of Canadian Municipalities, water utilities, several university think tanks, the Canadian Real Estate Association and a number of others. We presented the results of our work to ministers responsible for emergency management last May, and again in January 2019. We have been asked by these FPT ministers to design and cost alternatives to the present ad hoc Canadian system of bailing out those in harm's way with taxpayer dollars. Our report will be released publicly within days.
For context today, I would like to point out several facts. First, Canada has a climate adaptation plan as one of four pillars of the pan-Canadian framework on clean growth and climate change. Although we requested in 2016 that this plan deal comprehensively with flooding and made a thorough multi-partner submission to this effect, it does not do so.
Second, Canada has a new all-hazard national emergency management plan as a result of extensive ministerial and senior official discussions over the past three years. This spring we have already witnessed a much more effective response to the 2019 floods than 2017. The IBC congratulates the ministers responsible for emergency management who collaborated across political lines to make this plan a reality, and Canadians are already benefiting from it.
Third, my industry was founded on addressing the financial risk of fire to both individuals and communities. After 350 years we manage it reasonably well. Almost every single person who was affected in the Fort McMurray fire had insurance and was quickly reimbursed for their loss. Flooding is another story.
Fourth, flooding imperils far more Canadians than wildfire, wind or hail. Here are some numbers. In 2013, 3,000 buildings were flooded across Calgary, Alberta. In 2016, about 2,500 buildings were destroyed by the Fort Mac wildfire. In 2017, 5,300 homes were flooded in eastern Canada, particularly in New Brunswick, Quebec and Ontario. In 2018, the B.C. wildfires that raged all summer damaged 300 homes. In the spring of 2019, this year, 17,500 homes have been flooded across eastern and central Canada. These numbers do not account for the number of people flooded every year, in every province, from extreme rainfall events.
Yes, we do need to improve our response to wildfire. There are health issues from smoke inhalation that extend far beyond the fire zone itself. Wildfire is a growing hazard and IBC fully supports the implementation of the Canadian wildland fire strategy and, specifically, the widespread implementation of FireSmart programming.
Relatively speaking, flooding affects far more Canadians than any other natural peril and we are much further behind in our ability to help Canadians recover. Almost every single individual who suffers direct financial loss from wildfire is covered by insurance. They are not left in financial ruin. Flooding affects more people and, frankly, we do not have a coherent game plan for it.
Some provinces want to stop using taxpayer dollars to repair flooded residences. Others don't. Some provinces want to move people out of harm's way through home buyouts. Others don't. Some provinces still allow for building on flood plains. We have an ad hoc, non-prioritized system of funding flood infrastructure. Beyond improvements to emergency management, our approach to floods is uncoordinated.
Contrast this with the United States, where FEMA runs a sophisticated national high-risk flood insurance scheme run by the federal government; or with Great Britain, where a similar national scheme is run by private insurers. In both cases, funding for infrastructure deployment, strategic retreat options and citizen awareness initiatives are all coordinated with the insurance program. In fact, Canada is the only G7 country without a national coordinated approach to flooding.
Such an approach can only come through federal leadership. We have come a long way in the past two years, thanks to Minister Goodale's leadership, but that leadership must be sustained. This is a complex file.
This is why, as we head into a federal election, IBC is calling for a national action plan on flooding, built on the lessons learned from the work of our National Advisory Council on Flood Risk.
There are approximately one million homes, or 10% of all residences across the country, at high risk. In late 2015 property and casualty insurers brought overland flood insurance to the market and we now estimate that 80% of Canadians do have access to overland flood insurance. However, there are certain areas in Canada where, in many of them, the risks are simply too high for the insurance market to normally support.
IBC believes that a national action plan on flooding should focus on three key pillars: educate, protect and change.
First, on education, governments and the private sector should use flood maps to educate and empower consumers to reduce their own risks. The federal government should make an immediate surge investment through Natural Resources Canada to improve the quality of terrain data, which is the foundation of all flood mapping in the public and private sector, whether you're a municipality or a private insurer.
Our base terrain maps must be improved from 30 metres in resolution to at least five metres. For two straight years the Canadian Centre for Mapping has sought funds for this purpose, but has unfortunately been declined.
Then the federal government should create an authoritative online portal where consumers, businesses, realtors, mortgage lenders and others can access flood maps and convey both the personal level of risk and what can be done to address it. International research shows that if consumers and businesses do not know their level of risk, they're not likely to do anything about it. This past January federal, provincial and territorial ministers of emergency management underscored the urgent need for such a portal.
The second pillar is protection. In short, we should move a few, then insure and protect the rest. Homes at the highest risk of repeated flooding should be relocated or elevated. If they repeatedly flood, they simply cannot be insured. We cannot move one million homes, though, which is why strategic retreat must fit hand in glove with coordinated infrastructure upgrades, such as flood defences and a national high-risk insurance scheme similar to what is offered in Great Britain.
Allow me to spend a minute on this. Insurance, simply put, is a mechanism for risk transfer. If you are at risk of flooding or wildfire, you pay an insurer to take that risk for you, in full or in part. The insurer will then reward you or your community for lowering that risk. If your community builds a fire station or if you install smoke alarms and fire extinguishers, you are limiting the risk to the insurer and the insurer lowers your premiums as a reward.
Insurance is built on a system of incentives firmly rooted in behavioural economics. However, if you rely on taxpayer-funded bailouts there are no incentives to lower your own risk. This is why ministers of emergency management have asked the national advisory council to cost and design a high-risk insurance pool among other possible options for protecting Canadians.
In such a pool property owners would pay premiums that are as risk-based as possible, but to ensure affordability and take-up, these premiums would be capped and subsidized through a range of possible mechanisms. The pool would reward community and individual-level investments in flood defences, and these defences should include consideration of the role that natural infrastructure plays and the means needed to financially incent the restoration or conservation of those wetlands, riparian forests and coastal dune systems where they play a role in protecting us.
You've heard quite a bit about the merits of natural infrastructure, so let me illustrate with an example. Ninety-five per cent of southwestern Ontario has been cleared for agricultural purposes. The highest per capita loss area in the entire country, according to our flood modelling, is Windsor, Ontario. This is not a coincidence.
Financially, we need to develop the explicit mechanisms where natural infrastructure is factored into insurance schemes and communities are rewarded for restoring or conserving the forests and wetlands that protect them, such as how generations ago we incented communities to build fire stations.
Finally, a national action plan on flooding should focus on changing our land use and permitting practices. We should look at the model practice of conservation authorities in Ontario or the Fraser Basin Council in B.C. and determine how to strengthen them and leverage such approaches in other jurisdictions.
We should implement the new climate change considerations being developed for the national model building code in all jurisdictions as soon as possible.
In concluding, thank you once again, Mr. Chair, for the opportunity to present to you today. As we contemplate our approaches to climate change over the next few months, Canada's property and casualty insurers have a clear message. If adapting to flood is not an explicit part of your climate plan, your plan is not relevant to the single greatest climate threat facing this country.
Thank you.