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The Emergence of Flood Insurance in Canada: Navigating Institutional Uncertainty

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  • Jason Thistlethwaite

Abstract

Flood insurance has remained unavailable in Canada based on an assessment that it lacks economic viability. In response to Canada's costliest flood event to date in 2013, the Canadian insurance industry has started to develop a framework to expand existing property insurance to cover flood damage. Research on flood insurance has overlooked why and how insurance systems transition to expand insurance coverage without evidence of economic viability. This article will address this gap through a case study on the emergence of flood insurance in Canada, and the approach to its expansion. Between 2013 and 2016, insurance industry officials representing over 60% of premiums collected in Canada were interviewed. These interviews revealed that flood insurance is being expanded in response to institutional pressure, specifically external stakeholder expectations that the insurance industry will adopt a stronger role in managing flood risk through coverage of flood damage. Further evidence of this finding is explored by assessing the emergence of a unique flood insurance model that involves a risk‐adjusted and optional product along with an expansion of government policy supporting flood risk mitigation. This approach attempts to balance industry concerns about economic viability with institutional pressure to reduce flood risk through insurance. This analysis builds on existing research by providing the first scholarly analysis of flood insurance in Canada, important “empirical” teeth to existing conceptual analysis on the availability of flood insurance, and the influence of institutional factors on risk analysis within the insurance sector.

Suggested Citation

  • Jason Thistlethwaite, 2017. "The Emergence of Flood Insurance in Canada: Navigating Institutional Uncertainty," Risk Analysis, John Wiley & Sons, vol. 37(4), pages 744-755, April.
    • Handle: RePEc:wly:riskan:v:37:y:2017:i:4:p:744-755
    DOI: 10.1111/risa.12659
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    References listed on IDEAS

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    Cited by:

    1. Aaron B. Gertz & James B. Davies & Samantha L. Black, 2019. "A CGE Framework for Modeling the Economics of Flooding and Recovery in a Major Urban Area," Risk Analysis, John Wiley & Sons, vol. 39(6), pages 1314-1341, June.
    2. Boudreault, Mathieu & Ojeda, Angelica, 2022. "Ratemaking territories and adverse selection for flood insurance," Insurance: Mathematics and Economics, Elsevier, vol. 107(C), pages 349-360.
    3. Hudson, Paul & Raška, Pavel & Macháč, Jan & Slavíková, Lenka, 2022. "Balancing the interaction between urban regeneration and flood risk management – A cost benefit approach in Ústí nad Labem," Land Use Policy, Elsevier, vol. 120(C).

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