Seminar by Mathieu Boudreault

An Actuarial Analysis of a Canadian Flood Insurance Program

Floods are among the most frequent and costly natural disasters in Canada. However, flood insurance is optional in the country and not available to those most at risk of flooding. Flood losses continue to escalate and as a result a large part of the bill remains with the flood victims. This is despite the existence of last resort disaster financial assistance programs administered by the provinces and territories, and mostly financed by the federal government. The major floods in recent years are prompting an end to the status quo; and the federal government together with the insurance industry, are considering the establishment of a comprehensive national flood insurance program. In this presentation, we discuss the current state of flood-related financial risk-sharing in Canada, the distribution of modelled flood losses across the country, and the costing and funding of various hypothetical plans. We also analyze how spatial dependence affects the fat-tailedness of aggregate losses and the impact on the capitalization of flood insurance plans. In conclusion, we will connect the results to key public policy objectives and discuss a roadmap towards flood resilience in Canada. This research was accomplished in partnership with Public Safety Canada and the Insurance Bureau of Canada funded jointly with the Natural Sciences and Engineering Research Council of Canada.