Govt.FloodSolutions

Question 1

Why was the Task Force on Flood Insurance and Relocation established?

Answer 1

to explore solutions for high-risk areas and potential relocation strategies

Question 2

Identify and briefly describe the 3 types of flooding

Answer 2

• fluvial (river flooding) :
  
  • when the water level in a river, lake or stream rises and overflows onto the neighboring land
• pluvial
  
  • when an extreme rainfall event creates a flood independent of an overflowing water body
• coastal
  
  • when dry and low-lying land is submerged by seawater

Question 3

Identify 5 priority areas for action under EMS (Emergency Management Strategy)

Answer 3

1. Enhance whole-of-society collaboration
2. Improve understanding of disaster risks
3. Increase focus on whole-of-society prevention and mitigation
4. Enhance disaster response capacity
5. Strengthen recovery efforts by building back better to minimize the impacts of future disasters

Question 4

Identify and briefly describe the key drivers of Canada’s flood risk

Answer 4

* Population growth and urban development:
- urban densification in flood-prone areas contributes to flood risk (70% of Canada’s population)
- urban centers are more prone to flood risks due to their location on or near floodplains and coastlines
* Climate change:
- Heat-induced Risks - heat promotes wildfires and droughts, destroying vegetation and increasing runoff
- Extreme Precipitation - due to warmer temperatures
→ (creates pluvial risk, especially in urban areas with impermeable surfaces that can’t absorb water)
- Accelerated Warming - Canada’s climate is warming twice as fast as the global rate.
- Rising Sea Levels - coastal flooding

Question 5

Identify 3 problems pertaining to flood insurance in Canada

Answer 5

• high cost (especially for low-income households)
  –>recent flood events cause increased premiums
• low risk awareness
  –>information about floods, including flood maps, may be unavailable
• misaligned incentives
  –>taxpayer-funded DFA programs contribute to a moral hazard
  (because people may rely on that instead of buying insurance)

Question 6

Fully describe the implications of low risk awareness of flood risks in Canada

Answer 6

• no coverage: people may not purchase flood insurance if they are not aware of the risk
• no coverage: people may think their standard homeowner’s policy covers floods when it doesn’t
• insufficient coverage: people who do buy optional flood coverage may have insufficient protection
• insufficient mitigation: people may be less likely to invest in property-level flood protection

Question 7

Fully describe the moral hazards associated with misaligned incentives regarding flood risks in Canada

Answer 7

In general:
* a moral hazard is the expectation that governments will provide post-disaster financial assistance regardless of poor decisions by individuals and communities on where to build

Question 8

Briefly describe the concept of FRM (Flood Risk Management) (4)

Answer 8

• an alternative approach to conventional flood control measures
• promotes the use of non-structural mitigation measures to complement and enhance other types of mitigation
• stakeholders include: government, industry, communities, non-government organizations, individuals
• an iterative process of: acting, monitoring, reviewing, adapting

Question 9

Regarding FRM (Flood Risk Mgmt), identify roles & responsibilities of the federal govt (2)

Answer 9

• regulate insurers
• implement land use & flood risk management policies

Question 10

Regarding FRM (Flood Risk Mgmt), identify roles & responsibilities of the municipal govt (2)

Answer 10

• develop community emergency management plans
• addres unique challenges (geography, social/cultural)
  (particularly in northern and remote communities)

Question 11

Regarding FRM (Flood Risk Mgmt), identify roles & responsibilities of the insurance industry (2)

Answer 11

• provide flood insurance
• offer overland flood endorsements (fluvial, pluvial flooding)

Question 12

Regarding FRM (Flood Risk Mgmt), identify roles & responsibilities of the non-governmental groups (2)

Answer 12

• act as initial responders during flood incidents
• coordinate volunteers in recovery efforts

Question 13

Regarding FRM (Flood Risk Mgmt), identify roles & responsibilities of the communities & individuals (2)

Answer 13

• seek information to understand their property’s flood risk
• purchase flood insurance

Question 14

Identify the necessary preconditions for success of a private flood insurance market (3)

Answer 14

• Public awareness of flood risk
• Accurate & up-to-date flood mapping
• Investments in public and private flood defenses
• Limit post-disaster financial assistance from the government to encourage flood mitigation investments

Question 15

Identify prevention and mitigation measures an individual household can implement (4)

Answer 15

• installing a backwater valve
• having a basement sump pump
• maintaining appropriate lot grading
• clearing eaves troughs and extending downspouts

Question 16

Identify prevention and mitigation measures that can be implemented on a national level (4)

Answer 16

• stricter building codes
• improved flood risk information
• investments in climate resilience (Ex: infrastructure resilience, environmental resilience)
• funding for watershed level mitigation projects

Question 17

Identify the design characteristics of flood insurance programs (4)

*or varibales used to evaluate a flood program

Answer 17

• Administration: Role of Government versus Role of Private Insurers
• Choice: Voluntary or Compulsory
• Packaging: Standalone Product or Bundled with Other Perils
• Premiums: Risk-based or Uniform Pricing or gov’s rates

Question 18

Describe the flood insurance program in: Australia

Answer 18

Administration: private sector and government regulates
* promotes private partnerships for risk management
Choice: Voluntary (both offering and uptake)
* varied availability based on flood risk levels
Packaging: often Bundled with other perils
* coverage and specific flood-related perils vary by insurer
Premiums: Risk-based
* not regulated or subsidized by the government
* potentially high for highest risk properties
* retrofits recognized in premium calculations

Question 19

Describe the flood insurance program in: France

Answer 19

Administration: government oversees CatNat scheme
* CatNat is supported by state-owned CCR (that reinsures insurers)
* local governments are encouraged to adopt risk reduction plans
Choice: depends
* home insurance (including CatNat) complusory for property owners with a mortgage
* voluntary otherwise
Packaging: Bundled
* CatNat, covering flood and other natural disasters, is added to all property insurance contracts
Premiums: Uniform Pricing
* 12% surcharge on home insurance policies for natural disasters
* no incentive for property-level mitigation

Question 20

Describe the flood insurance program in: United Kingdom

Answer 20

Administration: Flood Re manages the flood insurance system.
* the Flood Re pool is a private sector entity accountable to the government,
Choice: depends
* not compulsory by law but often required by mortgage lenders for high-risk properties
* voluntary for properties without a mortgage or for low-risk properties
Packaging: Bundled with homeowner’s policies
* ceded to Flood Re when premiums exceed an affordability cap
Premiums: reflect home values rather than risk level
* affordability is prioritized
* supplemented by a levy on all residential policies
* a criticism is that high-value properties (wealthy homeowners) are effectively subsidized

Question 21

Describe the flood insurance program in: United States

Answer 21

Administration: NFIP (National Flood Insurance Program) administered through FEMA (Federal Emergency Management Agency)
* some involvement from private insurers
Choice: Depends
* Compulsory for homeowners with federally-backed mortgages in flood-prone areas
* Voluntary elsewhere
Packaging: Standalone
* discounts for communities implementing risk-reduction measures
Premiums: Risk-based
* some older government-subsidized policies will transition to risk-based

Question 22

identify considerations for guiding the development of flood policy options in Canada (4)

Answer 22

1. Minimize uncertainty:
   * invest in risk reduction in high-risk areas to expand insurability
2. MAXIMIZE market penetration & minimize adverse selection
   
   • incentivize (or require) the purchase of flood insurance through bundling of flood coverage with other perils
3. Design foraffordability
   * prioritize means-testing to guide any public subsidy to households for flood insurance affordability
   * but eventual goal is risk-based rates for everyone
4. Minimize moral hazard:
   * implement minimum deductibles and avoid incentivizing new development in high-risk areas

Question 23

Briefly describe the policy goals/objectives of Canada’s Task Force on flood insurance (6)

Answer 23

1. Adequate
   * settle claims quickly & accurately
2. Affordable
   * inclusive & equitable for customers
3. Available
   * for all types of floods (fluvial, pluvial, coastal) and in all geographic areas
4. Participation
   * ensure premiums are affordable and provide incentives purchasing
5. Risk-based pricing
   * incentives risk reduction & minimizes moral hazards
6. Value for money
   * reduce burden on public DFA
   * shift expenditures FROM recovery TO mitigation & adaption

Question 24

Would a flood premium of $250 for $500,000 of coverage be considered high-risk?

Answer 24

No, because $250 is less than 0.1% of 500,000 (which is $500)

AAL or premiums ≥ 0.1% of coverage to be consider High-risk

Question 25

What is cross-sbusidization?

Answer 25

• a transfer of some premium costs from HIGH-risk to low-risk homeowners

Question 26

How can low participation rates be improved in Canada where flood insurance is not mandatory? (2)

Answer 26

• Awareness of risk through education
• Lower premiums

Question 27

Identify reasons that the costs of flood risk may increase over time (3)

Answer 27

• inflation
• climate change (increases flood frequency and severity)
• population growth in flood-prone areas