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 (note that the task force prioritized engagement with Indigenous communities)

Question 2

Identify and briefly describe 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 and governance to strengthen resilience
2. Improve understanding of disaster risks in all sectors of society
3. Increase focus on whole-of-society disaster prevention and mitigation activities
4. Enhance disaster response capacity and coordination and foster the development of new capabilities
5. Strengthen recovery efforts by building back better to minimize the impacts of future disasters

Question 4

What does Priority 3 include as a priority outcome?

Answer 4

FPT governments assist in the development of options for sharing the financial risks of disasters
- could include engaging the private sector to develop an affordable private flood insurance model for the entire population, including clear incentives for mitigation of flood risks

Question 5

Define the term “risk” in the context of disasters

Answer 5

Disaster risk is the combination of the likelihood and the consequence of a specified hazard being realized

Question 6

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

Answer 6

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 7

Identify 3 problems pertaining to flood insurance in Canada

Answer 7

High cost (especially for low-income households)
- Recent flood events cause increased premiums and possibly withdrawal of coverage altogether

Low Risk Awareness
- Information about floods, including flood maps, may be unavailable

Misaligned incentives
- Taxpayer-funded DFA programs contribute to moral hazard (because people may rely on that instead of buying insurance)

Question 8

Fully describe 3 problems due to low risk awareness of Canadians in high-risk areas

Answer 8

1. When and where flood insurance is available, Canadians may not purchase it due to a lack of awareness of their level of flood risk, or they may erroneously assume flood risk is covered by standard home insurance.
2. Homeowners who have purchased optional flood coverage may not have sufficient protection for the amount of risk they face
   - Unfortunately, only after an event that homeowners discover they are under/un-insured.
3. Low-risk awareness means homeowners are less likely to make investments in property-level protections for flooding, whether or not they have insurance.

Question 9

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

Answer 9

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)

In particular:
- Homeowners: at the homeowner level, DFA doesn’t encourage risk reduction or insurance purchase
- Communities: at the community level, local governments & developers, benefit from property sales & tax revenues, but flood recovery costs fall largerly on other levels of government
- Regional & national: Cost-sharing of disaster recovery reduces incentives for risk reduction (which may include expensive infrastructure)

Question 10

Provide 3 examples of things outside the scope of the Task Force on Flood & Relocation’s report

Answer 10

1. Federal commitment to complete all flood maps in Canada
2. Federal commitment to provide interest free loans to homeowners for climate change mitigation and adaptation improvements to their domicile
3. Promote flood risk awareness in Canada through a public-facing information portal

Question 11

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

Answer 11

• 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 12

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: federal government

Answer 12

Roles:
- Support provincial/local efforts to mitigate/manage flood emergencies

Responsibilities:
- Monitor/manage emergencies in their respective areas of responsibility
- Financial assistance through the Disaster Financial Assistance Arrangement

Question 13

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Provincial/Territorial government

Answer 13

Roles:
- Regulate insurers
- Implement land use & flood risk management policies

Responsibilities:
- Make infrastructure investments
- Develop flood maps

Question 14

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Municipal government

Answer 14

Roles:
- Collaborate with PT governments to identify flood risks
- Lead local response and recovery during emergencies

Responsibilities:
- Enforce local construction and land-use by-laws
- Invest in structural and non-structural flood mitigation

Question 15

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Indigenous Communities

Answer 15

Roles:
- Develop community emergency management plans
- Coordinate with all other stakeholders

Responsibilities:
- Address unique challenges (geographical, social/cultural) particularly in northern & remote communities
- Ensure that emergency management plans are implemented and maintained

Question 16

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Insurance Industry

Answer 16

Roles:
- Provide flood insurance
- Data collection, research, public outreach

Responsibilities:
- Offer overland flood endorsements (fluvial, pluvial flooding, coastal coverage remains limited)
- Incentivize policyholders to engage in risk reduction (shift economic recovery burden away from DFA)

Question 17

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Non-Governmental Organizations

Answer 17

Roles:
- Act as initial responders during flood incidents

Responsibilities:
- Coordinate volunteers in recovery efforts

Question 18

Regarding FRM (Flood Risk Mgmt), identify the roles & responsibilities of: Communities & Individuals

Answer 18

Roles:
- Seek information to understand their property’s flood risk
- Pay taxes to support governmental relief

Responsibilities:
- Purchase flood insurance
- Cover their own uninsured losses

Question 19

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

Answer 19

1. improved Public awareness of flood risk
2. Accurate and up-to-date flood mapping across Canada
3. adequate and ongoing Investments in public and private flood defences
4. Limited or restructured post-disaster financial assistance to encourage flood mitigation investments

Question 20

Identify prevention and mitigation measures an individual household can implement (4) (Benefit-to-cost: 11:1)

Answer 20

• Installing a backwater valve
• Having a basement sump pump
• Maintaining appropriate lot grading
• Clearing eavestroughs and extending downspouts

Question 21

Identify prevention and mitigation measures a community can implement (3) (Benefit-to-cost: 6:1)

Answer 21

• Adopt climate-resilient best practices for: regulations, land use, urban planning, development
• Upgrade infrastructure
• Invest in natural infrastructure

Question 22

Identify prevention and mitigation measures that can be implemented on a national level (4) (Benefit-to-cost: 7:1)

Answer 22

• Stricter building codes
• Improved flood risk information
• Investments in climate resilience (Ex: infrastructure resilience, environmental resilience)
• Funding for watershed level mitigation projects

Question 23

Describe the concept of strategic relocation (4)

Answer 23

• Buy a high-risk property (government if often the buyer)
• Remove assets from high-risk property
• Restore site to undeveloped state
• Repurpose site as green infrastructure to better absorb floodwater (further reduces flood risk)

Question 24

Identify the inputs for the PS (Public Safety) approach for estimating flood damages (3)

Answer 24

Flood hazard:
- Refers to extent, magnitude (such as water depth or flow velocity) and probability of occurrence

Flood Exposure:
- Refers to the people, property, infrastructure and other social or economic assets which may become affected by flood hazard

Consequence (Flood Damages):
- How much damage floodwater is likely to cause to particular exposured people or assets

Question 25

Identify the output for the PS (Public Safety) approach for estimating flood damages

Answer 25

Risk - Estimates of average annual loss (AAL) from flooding as well as return-period level losses for residential properties in Canada

Question 26

Briefly discuss the methodology for estimating flood hazards

Answer 26

Canada has 2 types of flood hazard information: - Local regulatory flood mapping - Broad-coverage models mainly used by insurance firms Regulatory mapping is very accurate but available only in select areas Broad coverage models provide nationwide data (including flood depths for standard return periods and diverse flood types) Both were used for the estimation of flood hazard across Canada, due to their specific advantages in some areas

Question 27

Identify 3 advantages of broad-coverage models over local regulatory flood mapping

Answer 27

1. Nationwide coverage 2. Provides flood depths for standard return periods 3. Captures different flood types of fluvial, pluvial and coastal

Question 28

Briefly discuss the methodology for estimating flood exposure (3)

Answer 28

Requires a comprehensive residential properties database (on the "block" level of 20-30 properties) - Variety of databases were procured, combined and evaluated for completeness Information was then combined with building attributes, informed risk and flood susceptibility Finally, dataset was further broken down to individual households for consequence estimation

Question 29

Briefly discuss the methodology for estimating consequences

Answer 29

Relate flood depths in the models to estimate flood losses of residential properties - This is done using depth-damage models Was then possible to create 6 unique estimates of AAL expected from flooding per residential address across Canada, with two estimates of average annual loss in the northern portions of Canada.

Question 30

Briefly discuss the outputs of the flood damage assessment

Answer 30

- Estimates of AAL for residential properties throughout Canada based on the best available data. - Mean of 6 different damage estimates was used at each location to combine the intelligence from numerous flood damage model (this is more robust than having just 1 estimate)

Question 31

Identify the advantages of the flood damage analysis

Answer 31

- Involvement of 3 different operational flood hazard models currently in use by the Canadian insurance industry - Use of highest quality residential address database currently possible using several input datasets - Implementation of 4 different operational flood damage estimation methodologies

Question 32

Identify the design characteristics of flood insurance programs (4)

Answer 32

- Administration: Role of Government vs Role of Private Insurers - Choice: Voluntary or Compulsory - Packaging: Standalone Product or Bundled with Other Perils - Premiums: Risk-based or Uniform Pricing

Question 33

Desribe the flood insurance program in: Australia

Answer 33

Administration: government regulates the industry with minimum financial burden - 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 (& encouraged)

Question 34

Desribe the flood insurance program in: France

Answer 34

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 Note: CCR = Caisse Centrale de Reassurance

Question 35

Desribe the flood insurance program in: United Kingdom

Answer 35

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 - Availability for high-risk properties limited to those built prior to 2009 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 priortized - Supplemented by a levy on all residential properties - A criticism is that high-value properties (wealthy homeowners) are effectively subsidized

Question 36

Desribe the flood insurance program in: United States

Answer 36

Administration: NFIP (National Flood Insurance Program) administered through FEMA (Federal Emergency Management Agency) - Some involvement from private insurers (roles of varying degree and are paid a fee) Choice: Depends - Compulsory for homeowners with federally-backed mortgage in flood-prone areas - Voluntary elsewhere Packaging: standalone Premiums: risk based - Some older government-subsidized policies will transition to risk-based - Discounts for communities implementing risk-reduction measures

Question 37

Identify the 4 themes identified to help guide the development of policy options in Canada

Answer 37

1. Uncertainty (want to minimize this) 2. Market Penetration, adverse selection and mutuality (want to maximize this) 3. Affordability (design for this or uptake of flood insurance will be low, espcially for high risk areas) 4. Moral Hazard (want to minimize this)

Question 38

Identify 3 considerations to help guide the development of policy options for Canada under this theme: Uncertainty

Answer 38

1. Locate, map, profile and publicize high-risk flood areas 2. Invest in risk reduction in high-risk areas to expand insurability 3. Deter new property exposure in flood risk areas

Question 39

Identify 3 considerations to help guide the development of policy options for Canada under this theme: Market Penetration, adverse selection and mutuality

Answer 39

1. Leverage federal and provincial programs to incentivize or require the purchase of flood insurance in high-risk areas 2. Adopt the bundling of flood risk with other perils as a design priority 3. Collaborate with insurers to manage financial risk of high-risk properties, and aling incentives across low, medium, and high-risk properties

Question 40

Identify 3 considerations to help guide the development of policy options for Canada under this theme: Affordability

Answer 40

1. Negotiate an operational and simple definition of flood insurance affordability 2. Prioritze means-testing to guide any public subsidy to households for flood insurance affordability 3. Insurance affordability measures for high-risk properties should be explicitly temporary with the goal of levelling up to risk-based rates

Question 41

Identify 3 considerations to help guide the development of policy options for Canada under this theme: Moral Hazard

Answer 41

1. Ensure policies clearly outline exclusions 2. Implement a minimum deductible to share costs with the insured 3. Avoid incentivizing new development in high-risk areas, including areas that are likely to become high-risk in the future as climate change continues to change the risk landscape

Question 42

Briefly describe the policy goals/objectives of Canada's Task Force on Flood Insurance (1-2)

Answer 42

1. Provide adequate and predictable financial compensation for residents in high-risk areas - Key themes: adequate coverage, reliability/consistency/clarity of coverage 2. Incorporate risk-informed price signals and other levers that promote risk-appropriate land use, mitigation, and improved flood resilience - Key themes: Improve risk awareness for people, communities, and governments, Reduce perverse incentives that sustain/increase residential flood risk

Question 43

Briefly describe the policy goals/objectives of Canada's Task Force on Flood Insurance (3-4)

Answer 43

3. Be affordable to residents of high-risk areas, with specific considerations for marginalized, vulnerable, and/or diverse populations - Key themes: Inclusive, equitable access to insurance 4. Provide coverage that is widely available for those at high-risk across all regions - Key themes: availability (fluvial, pluvial, coastal) in all geographic regions, incorporating dynamic changes to risk over time. Coverage should be available in practical ways for people to access

Question 44

Briefly describe the policy goals/objectives of Canada's Task Force on Flood Insurance (5-6)

Answer 44

5. Maximize participation of residents in high-risk areas - Key themes: Ensure that within any option selected, uptake is maximized 6. Provide value for money for governments and taxpayers - Key themes: Flood insurance solution should (over time) reduce burden on public DFA for flooding, shifting expenditures from recovery to mitigation and adaptation. Should be cost-effective and sustainable

Question 45

Briefly describe the assumptions related to the 4 actuarial flood insurance models of the Task Force on flood insurance (5)

Answer 45

1. Total Flood Risk: 2.9B annual residential flood damage 2. Organizational start-up costs: not included (but on-going operational and maintance expenses are included) 3. Lifespan of Model: 25 yrs 4. Climate Change: Not considered (levels of risk are set to flood hazard models as of 2020) 5. Inflation: Not considered (difficult to predict but all models should be affected the same way anyway)

Question 46

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

Answer 46

If AAL or premiums ≥ 0.1% of coverage (for ex: 300$ premium for a 300K$ coverage)

Question 47

What are the 8 design features considered in the 4 insurance models from the Task Force on flood insurance

Answer 47

1. Threshold for "high risk homeowners" 2. Affordability 3. Premium Loading Factors 4. Cross Subsidization 5. Deductibles 6. Participation 7. Standardization of Flood Insurance Policies 8. Automatic Ceding of Flood policies

Question 48

Identify strategies for increasing affordability of flood insurance (2)

Answer 48

- Premium caps - Subsidies based on income

Question 49

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

Answer 49

Any 2 of: - Administrative and operational costs (claims admin, overhead costs, etc.) - Safety margins that ensure sufficient funds are collected to cover the expected risks - Additional living expenses

Question 50

What is cross-subsidization?

Answer 50

Cross subsidization is a way to redistribute the total amount of premiums paid by high-risk homeowners. Low risk homeowners would pay a higher premium than if it were fully risk-adjusted, with the objective to reduce, at least in part, the premium paid by high-risk homeowners.

Question 51

What is the advantage/disadvantage of deductibles regarding flood insurance

Answer 51

Advantage: Can serve to reduce moral hazard and incentivize risk reduction Disadvantage: can hinder take-up in a voluntary purchase scenario (especially high deductibles)

Question 52

Define "residual risk"

Answer 52

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

Question 53

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

Answer 53

Uninsured and underinsured homeowners - Note: when moving from a public DFA model to an insurance based model for flood coverage, important to consider residual risk that will be on the shoulders of the people mentioned above

Question 54

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

Answer 54

- Awareness of risk through education - Incorporation of affordability supports / lowering premiums

Question 55

Identify 3 examples of standardization of flood policies

Answer 55

1. Policy forms may be standardized to ensure clear, simplified, and understandable policies. 2. Perils and damages covered could be standardized across a group or all those insured 3. Coverage could also be bundled for different water-related perils in a standardized way to increase clarity and remove ambiguity of responsibility

Question 56

Describe the Flat Cap High Risk Pool model for flood insurance

Answer 56

General: - A high-risk pool - With minimal intervention by government - But with low premium cap & significant support from government Who is included? - Households at high-risk of flooding Income-based subsidies: - None (because premium cap is only 500$) Cross-Subsidization: - 20$ levy on all policies Participation Assumptions - Mandatory offer - Optional purchase - Leads to only 50% participation for high-risks Premium Loading Factor: - 96% of AAL (predominantly as a result of additional living expenses, claims, and claims admin)

Question 57

Describe the Tiered Cap High Risk Pool model for flood insurance

Answer 57

General: - A high-risk pool - With added intervention by government - 5 levels of cap (based on quintiles of reconstruction costs) Who is included? - Households at high-risk of flooding Income-based subsidies: - None (because tiered premium caps) Cross-Subsidization: - 40$ levy on all policies Participation Assumptions - Mandatory offer - Mandatory purchase with mortgage (optional without mortgage) - Leads to 65% participation for high-risks (since around 65% of homes have mortgages) Premium Loading Factor: - 96% of AAL (predominantly as a result of additional living expenses, claims, and claims admin) Standardization: - Comprehensive bundling of water coverage

Question 58

Describe the Public Insurance model for flood insurance

Answer 58

General: - a Crown Corporation (corporation owned by government) - underwrites flood insurance with private insurance as intermediary - Higher premium cap ($3000) with automatic government backstop Who is included? - All households (low, medium and high risk) Income-based subsidies: - Sliding scale Cross-Subsidization: - 45$ levy on all policies Participation Assumptions - Mandatory offer - Mandatory purchase (via bundling with homeowner's policy) - Leads to very high participation (90% for high risk) Premium Loading Factor: - 66% of AAL (predominantly as a result of additional living expenses, is lower because admin fees are charged directly to crown corporation) Standardization: - Comprehensive bundling of water coverage

Question 59

Describe the Public Reinsurance model for flood insurance

Answer 59

General: - A layered (using both public and private-based elements of previous models) - 1st layer: optional purchase from private market at risk-based rates at modest limit (25K) - 2nd layer: mandatory purchase above model limit but subsidized by crown corporation - No premium cap for 1st layer, 3000$ cap for 2nd layer Who is included? - All households (low, medium and high risk) Income-based subsidies: - None for 1st layer, sliding scale for 2nd layer Cross-Subsidization: - 20$ levy on all policies Participation Assumptions - Mandatory offer, optional purchase for 1st layer - Mandatory offer & purchase for 2nd layer (via bundling with homeowner's policy) - Leads to very high participation (90% high risk) for 2nd layer, low participation for 1st layer (35% high risk) Premium Loading Factor: - 1st layer: 166% of AAL (higher than previous models due to reins. costs, claims costs, additional living expenses, and enhanced safety margins) - 2nd layer: 66% of AAL (predominantly as a result of additional living expenses, is lower because admin, distribution & overhead costs are assumed by private market) Standardization: - Comprehensive bundling of water coverage

Question 60

Compare the 4 flood insurance models on: General Organization

Answer 60

High-Risk Pools used by: - Flat Cap High Risk Pool - Tiered High-Risk Pool (5 levels) Crown Corporation used by: - Public Insurer (underwrites insurance through private insurers) Public & Private elements used by: - Public Reinsurer (uses 2 layers)

Question 61

Compare the 4 flood insurance models on: Who is included

Answer 61

Includes only high-risk households: - Flat Cap High Risk Pool - Tiered High Risk Pool Includes all households (low, medium, and high risk): - Public Insurer - Public Reinsurer

Question 62

Compare the 4 flood insurance models on: Income-Based Subsidies

Answer 62

No subsidies (not necessary because of premium caps or private market) - Flat Cap High Risk Pool - Tiered High Risk Pool - Public Reinsurer (1st layer only) Sliding Scale Subsidies - Public Insurer - Public Reinsurer (2nd layer only)

Question 63

Compare the 4 flood insurance models on: Cross-Subsidization

Answer 63

All models have a small levy (20$, 40$, 45$, 20$)

Question 64

Compare the 4 flood insurance models on: Participation Assumptions

Answer 64

Mandatory Offer / Optional Purchase: - Flat Cap High Risk Pool - 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 65

Which flood insurance model(s) contain significant residual risk?

Answer 65

- Flat Cap High-Risk Pool - Tiered High-Risk Pool (Due to lower participation in those models vs the other two)

Question 66

Which flood insurance model is most costly to governments?

Answer 66

Public Insurer (but cost-per-capita basis for high-risk households is reasonable)

Question 67

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

Answer 67

Public Reinsurer (more flexible due to 2 layer split, and risk-reduction incentives due to risk-based premiums for first layer which are costly)

Question 68

Identify reasons that the costs of flood risk may increase over time (2)

Answer 68

1. Inflation on (re)construction costs is typically larger than inflation on common goods and services. 2. Climage change and population growth in the floodplains will put increasing pressure on any risk-sharing plan.

Question 69

Briefly describe 2 potential flood de-risking measures

Answer 69

1. Restricting eligibility for the highest-risk homeowners - Reduces costs - but leaves many homeowners unprotected - requires significant government spending in a catastrophe 2. Strategic relocation - reduces costs - but is potentially disruptive & lengthy

Question 70

How does each model perform in terms of Adequacy and Predictability of Compensation?

Answer 70

Flat Cap High-Risk Pool: average - Due to optional purchase, compensation may not be adequate due to inadequate coverages chosen by homeowners Tiered High-Risk Pool: average - Better than Flat Cap, but those not part of mandatory coverage may still have highly variable adequacy of coverage Public Insurer: Strong - Due to mandatory standardized coverage & comprehensive bundled flood coverage, coverage is likely to be adequate for majority of homeowners Public Reinsurer: Strong - Due to mandatory standardized coverage & comprehensive bundled flood coverage in 2nd layer, coverage is likely to be adequate for majority of homeowners

Question 71

How does each model perform in terms of Risk Reduction?

Answer 71

Flat Cap High-Risk Pool: average - Low premium cap does not incentivize strong risk reduction Tiered High-Risk Pool: average - Better than Flat Cap model, but even with progressive premium cap, does not incentivize strong risk reduction Public Insurer: average - High prem cap incentivizes risk reduction, but offset by income-based subsidies Public Reinsurer: Strong - Due to risk-based rates in layer 1, homeowners have strong incentive to reduce risks

Question 72

How does each model perform in terms of Affordability?

Answer 72

Flat Cap High-Risk Pool: Strong - Low premium cap leads to strong affordability Tiered High-Risk Pool: average - Although there is a progressive premium cap scale, it is based on home value and not on capacity of insureds to pay. Therefore, could be better Public Insurer: Strong - Combination of high premium cap & income-based subsidies leads to strong affordability score for this model Public Reinsurer: Average - Average due to same conditions as Public insurer in 2nd layer. However, 1st layer is not strong due to risk-based pricing which is usually unaffordable

Question 73

How does each model perform in terms of Availability?

Answer 73

All models: Strong - All models have comprehensive geographical coverage

Question 74

How does each model perform in terms of Participation?

Answer 74

Flat Cap High-Risk Pool: Weak - Low premium cap is the only driver of participation for high risks, since not mandatory, leads to large residual risk (due to low participation) Tiered High-Risk Pool: average - Better than Flat Cap model due to higher participation due to mandatory on homeowners with mortgages. However, still average due to overall low participation of high-risk homeowners (only 65%) Public Insurer: Strong - Mandatory bundling of flood insurance with home policies leads to almost perfect level of participation across all risk levels Public Reinsurer: Strong - Mandatory bundling of flood insurance with home policies leads to almost perfect level of participation across all risk levels (for 2nd layer) - Participation more in line with pool models for 1st layer (so residual risk is between tiered model & public insurer)

Question 75

How does each model perform in terms of Value for Money / residual risk?

Answer 75

Flat Cap High-Risk Pool: Weak - Requires significant amount of government funding in order to provide affordable coverage (though only a portion of high-risk homeowners are likely to be covered) - Leads to large residual risk (leads to more pressure on govt to provide ad-hoc relief) Tiered High-Risk Pool: average - Better than Flat Cap model due to mandatory on homeowners with mortgages (so more balance for residual risk) - Residual risk however is concentrated in high-risk areas Public Insurer: Strong - Has lowest overall residual risk, coming at higher cost to governments (which are more predictable) Public Reinsurer: Strong - Due to 1st & 2nd layer approach, more residual risk than public insurer but isn't terrible overall since is majorly for first layer which covers small events, so losses to govt will be on smaller scale

Question 76

State the 4 themes of the key findings of the Task Force on Flood Insurance and Relocation (Hint: CIRE)

Answer 76

1. Current Flood Risk 2. Insurance Considerations 3. Relocation Considerations 4. Equity Considerations

Question 77

Briefly describe the following key finding of the Task Force on Flood Insurance and Relocation: Current Flood Risk

Answer 77

- Total flood risk is currently estimated at 2.9B$ - Note that about 1/3 of this total is concentrated in only the top 1% riskiest homes

Question 78

Briefly describe the following key finding of the Task Force on Flood Insurance and Relocation: Insurance Considerations

Answer 78

- Many homeowners don't understand what's covered and what isn't covered regarding floods so standardization of policy language is important in addressing this - Maximizing participation in an insurance program is key because it spreads the risk across a broad population of homeowners of low, medium and high risk - Public intervention can close coverage gaps, but at a cost

Question 79

Briefly describe the following key finding of the Task Force on Flood Insurance and Relocation: Relocation Considerations

Answer 79

- Relocation is a powerful but potentially disruptive risk removal tool. - If relocation isn't possible, then "in-place" mitigation measures can be applied - In either case, these measures must be informed at the community level

Question 80

Briefly describe the following key finding of the Task Force on Flood Insurance and Relocation: Equity Considerations

Answer 80

- Affordability is key for equitable access among socio-economically disadvantaged groups requiring support - Education is key so that homeowners understand the risks and costs of floods and will take steps to remove or mitigate risks - Cultural connections of Indigenous peoples to water and land must be respected