A policy toolkit for municipalities to share flood risk management and damage costs

Dr. Daniel Henstra, Department of Political Science

Flooding is the most costly hazard for Canadian municipalities and recently became the largest source of property insurance claims. Escalating damage to property and infrastructure has prompted greater interest from municipalities in policies that share the responsibility for risk reduction and the burden of costs with other levels of government and non-governmental actors.

Policy instruments are tools or mechanisms of governance designed to achieve public objectives by leveraging state authority to influence the behaviour of individuals, groups and organizations. Research on flood policy instruments is scarce, and existing treatments have focused on the costs and benefits of a narrow set of flood management tools. This study presents an analysis of diverse policy instruments that municipalities can use to share flood risk, and an assessment of whether and how these tools have been implemented in two large Canadian cities – Calgary and Toronto – which have faced recent extreme flood events and are likely to experience more flooding in the future.


To identify a list of potential measures that could be used to share flood risk, an extensive collection of documents relating to municipalities was reviewed, including policy reports, council minutes, staff reports and academic publications. These measures were organized into three categories based on the objectives of flood risk management: (1) sharing the burden of the costs of recovery, (2) sharing the responsibility for risk reduction, and (3) sharing the costs of implementing risk reduction measures.

The documentation was then analyzed to identify whether, and to what extent, these measures are used in practice specifically by the cities of Calgary and Toronto. The results of this analysis were validated through semi-structured interviews with five municipal experts in flood and stormwater management in the two cities.


The first category of policy instruments relates to sharing the cost burden of flood damage with other levels of government and private sector stakeholders. Disaster assistance represents a clear example in which municipalities share the burden of loss with other levels of government if the extent of flood damage exceeds a particular economic threshold. Insurance is a second burden-sharing instrument, and is often sought by municipalities for the physical damage associated with flooding but also legal liability for claims from property owners who argue damage is a result of negligence in maintaining a duty of care. Unlike disaster assistance, insurance demonstrates risk sharing since premiums are informed by an assessment of the hazard, exposure and vulnerability for individual perils.

The second category of instruments is related to sharing responsibility for risk reduction behaviour. Although municipal governments are accountable for managing flood risk, stakeholders such as property owners, developers, planners, builders and real estate agents also play an important role in risk reduction. There is a range of instruments that municipalities can use to leverage the behaviour of non-governmental stakeholders in risk reduction:

  • Stakeholder engagement involves interactive collaboration with individuals who could be affected by decisions, or who have resources to support implementation. Examples include the formation of advisory groups that guide decisions and inform policy on flood risk management, and municipalities and local watershed management authorities working together to identify priority areas for infrastructure upgrades.
  • Public engagement, particularly with property owners, can encourage awareness of flood risk and property-level flood protection, gain insight into local knowledge of specific vulnerabilities, and adjust policy towards local contexts.
  • Risk communication responsibilities can also be shared, including flood warning systems to notify residents and emergency responders about impending flood threats, and hazard disclosure for real estate transactions in high-risk areas.
  • Economic instruments, such as subsidies and financial credits, can be used by municipalities to induce behaviour among property owners that reduces flood risk. By taking actions that reduce flood risk in exchange for an incentive, property owners adopt a portion of the responsibility for the municipality’s broader risk management policy.
  • Land use planning and bylaws are regulatory tools by which municipalities can leverage their legal authority to manage flood risk. In addition to conventional approvals that establish areas (e.g. floodplains) where development is restricted or managed, this instrument also includes integrated stormwater management, involving the use of green infrastructure and low-impact development practices to decrease water entering stormwater systems by detaining it on site and allowing it to infiltrate into the soil.

The third category of instruments is associated with sharing the costs of risk reduction. Municipalities can directly finance these measures by levying various types of taxes and fees that finance collective risk reduction initiatives. By directing these taxes and fees to high-risk areas, the costs of expensive measures, such as stormwater infrastructure, are offset for low-risk areas.

An analysis of Toronto and Calgary’s use of flood risk sharing instruments reveals that, while there is a wide range of tools available to share the responsibility and costs of flood management with other levels of government, regional watershed management organizations and the private sector, the cities have not embraced the full range of tools available. For example, both cities employ a range of requirements to manage stormwater by developers and homeowners through stormwater management plans and bylaws, but they have not implemented economic instruments as a means of incentivizing the uptake of property-level flood defenses.

Furthermore, both Calgary and Toronto use the flood hazard probability rather than flood risk as a means of designing policy instruments, which reflects a broader problem with Canadian flood management. Design standards for most policies, such as stormwater management, rely on historical flood experiences and are static regardless of the higher exposures and vulnerability that increase the risk for consequences. A disproportionate focus on riverine flooding rather than pluvial flooding, which is much more costly in terms of consequences, reveals further evidence of the limitations involved in the hazard-based approach.


This analysis reveals that, despite a diverse range of policy options, risk sharing tools are underutilized and continue to be informed by single hazard-based design standards rather than an assessment of flood risk. This leaves municipalities exposed to concentrated economic risk, rather than diversifying risk in ways that improve resiliency. In addition, the adoption of risk sharing is becoming more urgent given the increasing vulnerability and exposure of municipalities to flooding associated with climate change. Without a wider embrace of risk sharing, municipalities face a growing concentration of flood risk within urban areas that could affect the affordability of housing, limit insurance availability and affordability, and increase the requirements for obtaining disaster assistance, in addition to legal liability through class-action lawsuits.

Jason Thistlethwaite & Daniel Henstra (2017). Municipal flood risk sharing in Canada: A policy instrument analysis, Canadian Water Resources Journal 42:4, 349-363.

Contact: Daniel Henstra, Department of Political Science; Jason Thistlethwaite, School of Environment, Enterprise and Development

For more information about the Water Institute, contact Amy Geddes.