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
• prioritized engagement with indigenous communities

Question 2

identify and briefly describe the 3 types of flooding

Answer 2

• fluvial: water level overflows onto neighborhood land
• pluvial: extreme rainfall
• coastal: dry and low lying land submerged by seawater

Question 3

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

Answer 3

• enhance whole of society collaboration
• improve understanding of disaster risks
• increase focus on whole of society prevention and mitigation
• enhance disaster response capacity
• strengthen recovery efforts by building back better to minimize impacts of future disasters

Question 4

define the term “risk” in the context of disasters

Answer 4

combination of likelihood and consequence of a specified hazard being realized

Question 5

compare “hazard” and “risk”

Answer 5

flood is a hazard, but it doesnot become a risk unless assets (people, property) are affected by it
i.e. need consequences attached

Question 6

identify and describe the 2 key drivers of Canada’s flood risk

Answer 6

1) population growth and urban development
- urban densification in flood prone areas contributes to flood risk
- urban centers are more prone to flood risks due to their locations on or near coastlines
2) climate change (HEAR)
- Heat induced risks
- Extreme precipitation
- Accelerated warming
- Risking sea levels

Question 7

identify 3 problems pertaining to flood insurance in Canada

Answer 7

1) High cost
- especially for low income households
- recent flood events cause increased premiums an possibly withdrawal of coverage altogether
2) Low risk awareness
- information about floods, including flood maps may be unavailable
3) misaligned incentives
- taxpayer funded DFA programs contribute to a moral hazard
- because people may rely on that instead of buying insurance

Question 8

fully describe the implications of low risk awareness on flood risks in Canada

Answer 8

• 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 flood 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 9

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

Answer 9

Generally,
- 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
Particularly,
- HO: DFA doesn’t encourage risk reduction or insurance purchase
- communities: local governments and developers benefit from property sales and tax revenues but flood recovery costs fall largely on other levels of government
- regional and national: cost sharing of disaster recovery reduces incentive for risk reduction which may include expensive infrastructure

Question 10

briefly describe the 4 concepts of FRM (Flood Risk Management)

Answer 10

• 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: govt/industry/communities/non gov organizations/individuals
• an iterative process of: acting, monitoring, reviewing, adapting

Question 11

regarding FRM, identify RRs of federal government

Answer 11

Role: more broad, Resp: specific task
- role: support provincial and local efforts to mitigate flood emergencies
- resp: monitor emergencies, financial assistance

Question 12

regarding FRM, identify RRs of provincial/territorial government

Answer 12

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

Question 13

regarding FRM, identify RRs of municipal government

Answer 13

• lead local response and recovery during emergencies
• invest in structural and non structural flood mitigation

Question 14

regarding FRM, identify RRs of indigenous communities

Answer 14

• develop community emergency management plans
• address unique geography and social challenges in remote communities

Question 15

regarding FRM, identify RRs of the insurance industry

Answer 15

• provide flood insurance
• offer overland flood endorsements

Question 16

regarding FRM, identify RRs of non government groups

Answer 16

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

Question 17

regarding FRM, identify RRs of communities and individuals

Answer 17

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

Question 18

identify the necessary preconditions for success of a private flood insurance market

Answer 18

LIAP (liar with a p)
- Limit post disaster financial assistance from government to encourage flood mitigation investment
- Investments in public and private flood defenses
- Accurate and up to date flood mapping
- Public awareness of flood risk

Question 19

identify prevention and mitigation measures an individual household can implement (benefit to cost 11:1)

Answer 19

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

Question 20

identify prevention and mitigation measures a community can implement (benefit to cost 6:1)

Answer 20

• adopt climate resilient best practices
• upgrade infrastructure
• invest in natural infrastructure

Question 21

identify prevention and mitigation measures that can be implemented on a national level (benefit to cost 7:1)

Answer 21

• stricter building codes
• improved flood risk information
• investments in climate resilience
• funding for watershed level mitigation projects

Question 22

describe the concept of strategic relation

Answer 22

BRRR…COLD
- Buyout
- Remove assets from high risk properties
- Restore site to underdeveloped state
- repurpose site as green infrastructure

Question 23

identify the inputs for the PS (Public Safety of Canada) approach for estimating flood damages

Answer 23

fec
- flood hazard: extent, magnitude, prob of occurrence
- exposure: people, infrastructure, property
- consequence: floodwater damage

Question 24

identify the outputs for the PS (Public Safety of Canada) approach for estimating flood damages

Answer 24

risk
- predicted loss of people/infrastructure/property
- average annual loss from flooding
- return period level losses for residential properties in Canada

Question 25

discuss the methodology for estimating flood hazards

Answer 25

Canada has 2 types of flood hazard information 1) local regulatory flood mapping 2) broad coverage models mainly used by insurance firms - regulatory mapping is very accurate but available only in selected areas - broad coverage models provide nationwide data

Question 26

identify 3 advantages of broad coverage models

Answer 26

- national wide coverage - provides flood depths for standard return periods - captures different flood types of fluvial, pluvial and coastal

Question 27

discuss the methodology for estimating flood exposure

Answer 27

- requires a comprehensive residential properties database - requires building attributes, informed risk and flood susceptibility - dataset was further broken down to individual households for consequence estimation

Question 28

discuss the methodology for estimating consequences

Answer 28

- relate flood depths in the models to estimate flood losses of residential properties - this is done using depth damage models

Question 29

identify the design characteristics for flood insurance programs

Answer 29

CAPP - Choice: voluntary or compulsory - Administration: role of govt vs role of private insurers - Packaging: standalone product or bundled with other perils - Premiums: risk based or uniform pricing

Question 30

describe the flood insurance program in Australia

Answer 30

1) Admin: - government regulates the industry with minimal financial burden - promotes private partnerships for risk management 2) Choice: - voluntary both offering and uptake吸收 - varied availability based on flood risk levels 3) Packaging - often bundled with other perils - coverage and specific flood related perils vary by insurer 4) Premiums: - risk based - not regulated or subsidized by the government - potentially high for highest risk properties - retrofits recognized in premium calcs

Question 31

describe the flood insurance program in France

Answer 31

1) Admin: - govt oversees CATNAT - CATNAT supported by state owned CCR (that reinsures insurers) - local govt are encouraged to adopt risk reduction plans 2) Choice: - home insurance including catnat compulsory for property owners with a mortgage - voluntary otherwise 3) Packaging: - bundled - catnat covering flood and other natural disasters is added to all property insurance contracts 4) Premiums: - uniform pricing - 12% surcharge on home insurance policies for natural disasters - no incentive for property level mitigation

Question 32

describe the flood insurance program in UK

Answer 32

1) admin: - Flood Re manages the flood insurance system - Flood Re pool is a private sector entity accountable to the government 2) choice: - not compulsory by law but often required by mortgage lenders for high risk properties - voluntary for properties without a mortgage or low risk properties - availability for high risk properties limited to those built prior to 2009 3) packaging: - bundled with homeowner's policy - ceded to flood re when premiums exceed an affordability cap 4) premiums: - reflect home values rather than risk level - affordability is prioritized - supplemented by a levy on all residential policies - criticism is that high value properties are effectively subsided

Question 33

describe the flood insurance program in USA

Answer 33

1) admin: - NFIP (National Flood Insurance Program) administered through FEMA (Federal Emergency Management Agency) - some involvement from private insurers 2) choice: - compulsory for homeowners with federally backed mortgages in flood prone areas - voluntary else where 3) packaging: - standalone - discounts for communities implementing risk reduction measures 4) premiums: - risk based - some older government subsidized policies will transition to risk based

Question 34

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

Answer 34

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

Question 35

describe the policy goals and objectives of Canada's Task Force on flood insurance

Answer 35

AAAPRV - Adequate and predictable compensation: settle claims quickly and accurately - Affordable: inclusive and equitable for customers - Available: for all types of floods and in all geo areas for all risk levels - Participation: ensure premiums are affordable and provide incentives purchasing - Risk based pricing: incentives risk reduction and minimizes moral hazards - Value for money: reduce burden on public DFA, shift expenditures from recovery to mitigation and adaption

Question 36

describe the assumptions related to the 4 actuarial flood insurance models of the task force on flood insurance

Answer 36

- total flood risk: 2.9B annual residential flood damage - organizational start up costs: not included but on going operational and maintenance expenses are included - lifespan of model: 25 years - climate change and inflation not considered

Question 37

4 conceptual models for flood actuarial analysis

Answer 37

- flat cap high risk - tiered high risk pool - public insurance - public reinsurance

Question 38

how are the highest risk (top 10%) homeowners for flood risk identified?

Answer 38

AAL or prems >=0.1% of coverage

Question 39

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

Answer 39

no because 250<500

Question 40

identify strategies for increasing affordability of flood insurance

Answer 40

- premium caps - subsides based on income

Question 41

identify 2 items that are covered by premium load factors in flood insurance

Answer 41

any 2 of - administrative and operational costs - risk buffers - living expenses

Question 42

what is cross subsiziation?

Answer 42

a transfer of some premium costs from high risk to low risk homeowners

Question 43

do high deductibles reduce participation?

Answer 43

yes, but high deductibles also encourage risk mitigation by homeowners

Question 44

define residual risk

Answer 44

the amount of financial risk left in the system once insurance options have been applied

Question 45

who pays the cost of residual risk in the context of residential flood insurance?

Answer 45

uninsured and underinsured homeowners

Question 46

how can low participation rates be improved in Canada where flood insurance is not mandatory?

Answer 46

- awareness of risk through education - lower premiums

Question 47

identify 1 benefit of standardization of flood policies

Answer 47

- simplified policy language - unified coverage types - bundling of perils for clairity

Question 48

describe the flat cap high risk pool model for flood insurance

Answer 48

- a high risk pool with minimal intervention by government but with low premium cap and significant support from government - house holds at high risk of flooding included -no income based subsidies - 20$ levy on all policies - mandatory offer, optional purchase

Question 49

describe the tiered high risk pool model for flood insurance

Answer 49

- high risk pool with added intervention by government, 5 levels of cap based on quantiles of reconstruction costs - households at high risk of flooding included - no income based subsidies because tiered premium caps - 40$ levy on all policies - mandatory offer, mandatory purchase with mortgage, optional without mortgage

Question 50

describe the public insurer model for flood insurance

Answer 50

- a crown corporation (corporation owned by the government) - underwrites flood insurance with private insurance as the intermediary - higher premium cap (3k) with automatic government backstop - all households are included - income based subsidies is a sliding scale - $45 levy on all policies - mandatory offer and purchase via bundling with homeowner's policy

Question 51

describe the public reinsurer model for flood insurance

Answer 51

- a layered approach that builds on private and public used models - 1st layer is an optional purchase from private market at risk based rates at modest limit - 2nd layer is a mandatory purchase above modest limit but subsidized by crown corporation - no prem cap for 1st layer, prem cap of 3k for 2nd layer - all households included - no income based subsidies for 1 st layer, sliding scale for 2nd layer - $20 levy on all policies - mandatory offer, optional purchase for 1st layer - mandatory offer & purchase for 2nd layer via bundling with homeowner's policy

Question 52

compare 4 flood insurance models on general orgnization

Answer 52

High-Risk Pools used for - flat cap high risk pool - tiered high risk pool (5 levels or tiers) Crown Corporation used by - public insurer (underwrites insurance through private insurers) Public and Private elements used by - public reinsurer (uses 2 layers)

Question 53

compare the 4 flood insurance models on who is included

Answer 53

include only high risk households: - flat cap high risk - tiered high risk include all households - public insurer - public reinsurer

Question 54

what are 3 advantages of public reinsurer

Answer 54

- flexibility in purchase offer - strong risk reduction incentives to homeowners - requires reduced funding but retains good coverage for major events

Question 55

compare the 4 flood insurance models on income based subsidies

Answer 55

no subsidies: - flat cap high risk - tiered high risk - public reinsurer - 1st layer only sliding scale subsidies: - public insurer - public reinsurer - 2nd layer only

Question 56

compare the 4 flood insurance models on cross subsidization

Answer 56

all models have a small levy (20/40/45/20)

Question 57

compare the 4 flood insurance models on participation assumptions

Answer 57

mandatory offer/optional purchase - flat cap high risk - public reinsurer - 1st layer only mandatory offer/mandatory purchase with mortgage/otherwise optional purchase - tiered high risk pool mandatory offer/mandatory purchase (via bundling) - public insurer - public reinsurer -2nd layer only

Question 58

which flood insurance model contain significant residual risk?

Answer 58

- flat cap high risk pool - tiered high risk pool

Question 59

which flood insurance model is mots costly to governments?

Answer 59

public insurer but cost per capita basis for high risk households is reasonable

Question 60

which flood insurance model provides the greatest flexibility and risk reduction incentives?

Answer 60

public insurer

Question 61

identify 3 reasons that the costs of flood risk may increase over time

Answer 61

- inflation - climate change - population growth in flood prone areas

Question 62

briefly describe 2 potential flood de risking measures

Answer 62

1) restrict eligibility for the highest risk homeowners - reduce costs - but leaves many homeowners unprotected so requires significant government spending in a cat 2) strategic relocation - reduces costs - but is potentially disruptive and lengthy

Question 63

which flood insurance policy objective performs strongly for all flood insurance models?

Answer 63

availability performs strongly for all models because all provide comprehensive geographical coverage

Question 64

which flood insurance models perform strongly on 5 of the 6 flood insurance policy objectives?

Answer 64

public insurer - performs strongly on all policy objectives except risk reduction public reinsurer - performs strongly on all policy objectives except affordability

Question 65

which flood insurance models perform weakly on at least 1 policy objective

Answer 65

flat cap high risk pool - weak on participation because residual risk is high - weak on value of money because it's expensive for the government

Question 66

which flood insurance model has strong performance for the fewest number of policy objectives?

Answer 66

Tiered High Risk Pool - performs strong only for availability

Question 67

which policy objective perform strongly for only1 model? Identify the model

Answer 67

Risk Reduction performs strongly only for Public Reinsurer model - balance homeowner and government mitigation incentives - encourages individual and community level risk reduction strategies

Question 68

review the table of policy objectives and flood insurance models

Question 69

briefly describe 4 key findings of the Task Force on Flood Insurance and Relocation

Answer 69

4 categories 1) relocation considerations - relocation is powerful but disruptive 2) insurance considerations - standardization of policy language 3) current flood risk - total flood risk is currently estimated at 2.9B, about 1/3 of this total is concentrated in top1% of the riskiest homes 4) equity considerations - affordability & education is key - cultural connections of indigenous people to water and land must be respected