Thank you, Mr. Chair, for the invitation and the opportunity to speak to the standing committee today.
I'm Craig Stewart, vice-president of federal affairs, and I'm joined by Nadja Dreff, our chief economist at Insurance Bureau of Canada or IBC. We are the national trade association representing Canada's private home, car and business insurers.
I'm going to speak to three topics today. The first is protecting Canadians from escalating climate risk, particularly flooding. Second is protecting Canadians from a severe earthquake. Third is the importance of transitioning Canada to a low-carbon, resilient and competitive economy by 2050.
First is climate risk. Flooding is the single greatest climate threat facing Canadians today. Last January, on behalf of the National Advisory Council on Flood Risk, I presented financial options for addressing flood risk to federal, provincial and territorial ministers responsible for emergency management. The national advisory council had been appointed by then minister of public safety Ralph Goodale, after the 2017 floods across eastern Canada. After 18 months of consultations, we delivered a report that detailed a comprehensive solution that would ensure that every Canadian would be financially protected from flooding, irrespective of the risk they face.
In part because of that work, six different cabinet ministers have flooding as part of their mandate letters. Together, they are to deliver a coordinated action plan on flooding. However, for that to happen, some foundational work must be supported through the federal budget.
We can separate Canadian properties into three groupings. Properties in group one are at the highest risk and will flood predictably every 10 to 20 years. Group two, still at high risk, will flood predictably at least once every 100 years. Group three represents everybody else. Flooding for these properties is an unpredictable accident, if you will. This group, which represents about 90% of Canadian properties, can be insured by regular overland flood insurance. However, other solutions are needed for the remaining 10%, those in groups one and two.
Those in group one, which will flood predictably every 10 to 20 years, can be addressed either through home relocation programs, called strategic retreat, or through significant home retrofits that elevate their homes, or possibly through investments in flood defence infrastructure.
Those in group two, those within a 100-year flood interval, should be insured through a public-private partnership, a specialized high-risk insurance pool, which is what happens in many countries, such as the U.S. and the United Kingdom. If these homes are also de-risked through home retrofits or investment in flood defence infrastructure, they could join group three and be eligible for the regular insurance market. Our goal is to reduce the number of Canadians in groups one and two over time.
To meet mandated ministerial commitments, three items should be included within the budget 2020 fiscal framework.
First is dedicated funding to design and cost a high-risk insurance pool and an associated program of strategic retreat. This process should be consultative and include consideration of indigenous and other vulnerable populations. As part of this, funding is needed to align public and private flood risk models. If insurers, banks, realtors and governments do not have a common, reliable and accurate flood map, Canadian consumers will not be well served.
Second, funding is needed for a home retrofits program that addresses flood resilience as well as energy efficiency.
Third, funding is needed for targeted flood defence infrastructure through an expanded disaster mitigation and adaptation fund. Infrastructure Canada must have the internal capacity to deliver such funding and should be supporting capacity in smaller communities that lack the expertise to apply for it.
The second topic I will address is Canada's financial resilience to an earthquake. Every developed country at high risk of earthquake has a public-private partnership in place designed to ensure financial stability and protect consumers in the case of a significant event—every country, that is, except two: Italy and Canada.
Canada has two high-risk populated regions: southwestern British Columbia and the Quebec City-Montreal corridor. Finance Canada is currently researching solutions as part of the financial sector framework review, and we are in full support of this work.
Budgetary language reflecting a commitment to finding a solution within a specific period of time would be welcome. Furthermore, IBC recommends that the federal government foster the appropriate financial regulatory environment that allows insurers and re-insurers to be part of the climate and earthquake risk solution. This means ensuring that OSFI regulations do not unduly impose insurance capacity constraints, which could negatively impact insurance affordability for Canadians.
Finally, we wish to wholeheartedly endorse the recommendations of the expert panel on sustainable finance. Ms. Zvan, as a member of that expert panel, is better positioned to speak to these. However, we would like to underline that the fourth recommendation—for a Canadian centre for climate information and analytics—is foundational, in our view, for promoting resilience.
Referring back to flooding, any investments in flood mapping should be linked to the creation of this centre. The private sector will help to pay for this data; governments do not have to complete flood mapping all on their own.
Thank you again, Chair, for the opportunity to present to you today. I'll close by saying that, as climate change could be considered a central theme for the upcoming federal budget, Canada's P and C insurers have a clear message. If adapting to flood is not an explicit part of a climate plan, that plan is not relevant in terms of the single greatest climate threat facing Canadians and their pocketbooks today.