Thank you very much.
Good morning. I am speaking to you as a professor of actuarial science at the Université du Québec à Montréal, or UQAM, as the research chair in actuarial and climate sciences at UQAM, and as a full member of the Canadian Institute of Actuaries. I worked with the task force on flood insurance and relocation, and I participated in a research partnership with Public Safety Canada and the Insurance Bureau of Canada. Through the research chair, I work with three of the largest property and casualty insurers in the country.
After a brief overview of the situation, I will discuss three important elements for ensuring the long-term viability of insurance programs for extreme weather events, and I will then propose a potential solution for the federal government based on international experience.
According to the Insurance Bureau of Canada, insured losses have increased by about 6% every year for 30 years, which is well above the rate of inflation. That kind of increase rate isn't sustainable without affecting insurability. Canada isn't alone in facing significant cost increases. For example, in France, the home insurance tax that funds the natural disaster insurance plan went from 12% to 20% in January 2025. As the federal government considers implementing a Canadian flood insurance program, questions about the viability of a public-private partnership are legitimate.
How can we ensure the long-term viability of insurance programs for extreme weather events? There has to be much more investment in adaptation, since the current investments are meagre. However, to get there, it's also important to know where to invest, what the most cost-effective measures are and, above all, how to encourage homeowners, municipalities and provinces to adopt them. For that reason, I will emphasize risk awareness, the availability of financial incentives and the appropriate sharing of responsibilities.
First, it's important to increase mapping efforts for areas at risk. While considerable progress has been made in flood mapping, pluvial and coastal floods still have to be mapped, along with similar mapping for wildfires and hail. The division of powers between the provinces and the federal government also complicates the task of gathering and reconciling the data needed to estimate the financial risks associated with extreme weather events. At the same time, gaps make it difficult to analyze the costs and benefits of a number of adaptation measures.
Knowing where, how and how much to invest in adaptation is good; setting up financial incentives to invest in adaptation is better. Despite well-established public-private partnerships in France and the United States, their immunization programs remain largely underused. One of the major disincentives for adaptation is the capping or subsidization of insurance premiums, particularly for homeowners in high flood risk areas in the United States, France and the United Kingdom. California also offers a striking example of the consequences of capping premiums, which has encouraged people to settle near areas at risk of forest fires.
It's important to understand that a high insurance premium in a competitive insurance market is quite often a symptom of excessive risk and that reducing risk is more beneficial in the long run than artificially capping premiums. While I support capping or subsidizing premiums for low-income households, these measures shouldn't be long-term solutions for making insurance affordable.
I would add that the current division of responsibilities for the financial management of floods can slow down adaptation efforts. Provinces and municipalities are responsible for land use planning, while the cost of financial assistance for disaster victims is largely absorbed by the disaster financial assistance arrangements, or DFAA. That program is funded equally by all Canadian taxpayers. That pooling of costs is commendable, but it's also a potential barrier to adaptation. Converting the DFAA into a self-funded provincial reinsurance program, where premiums are proportional to risk, could help control its use and encourage risk management practices that are sound and sustainable in the long term.
I also propose creating a Crown corporation whose mandate would be to administer this reinsurance program, as well as reassure the industry, provinces and municipalities. A public reinsurance corporation would strengthen the Canadian insurance industry's capacity to manage the risk of disasters such as earthquakes and forest fires and make it less dependent on the international market, which is currently tightening its access conditions for Canada.
The federal government should also support any initiatives to certify the resilience level of buildings. The certificates would send a major signal to the market for maintaining insurability and securing mortgage credit.
