Severe flooding in Texas earlier this month, which left more than 130 people dead and caused billions in damage, has renewed scrutiny of Canada’s preparedness for climate-related disasters and its ability to insure them, according to Policy Options Politiques.
In Budget 2023, the federal government committed $31.7 million to establish a Crown corporation known within the industry as “Canada Re” to administer a high-risk residential flood insurance program. However, funding to launch the program was not included in the 2024 budget.
During the April federal election campaign, the Liberal Party promised $450 million over five years to support the program, with a rollout planned for April 2026. The incoming government now faces pressure to deliver on that commitment, Policy Options Politiques said.
Flooding has since become one of Canada’s most costly insured perils, averaging $850 million in claims each year, according to the Insurance Bureau of Canada. Despite this, about one in 10 households cannot access affordable flood insurance. Those without coverage often rely on federal disaster aid through the Disaster Financial Assistance Arrangements (DFAA) program, which shifts flood-related losses onto public finances.
Insurance and public policy experts argued that reforming the DFAA is necessary to manage the financial risks associated with increasingly severe flooding. One proposal involves converting the program into a public-private partnership that would incorporate the insurance sector’s underwriting, distribution and claims handling capabilities. Supporters say this model could improve efficiency, enhance service, and reduce long-term public costs.
In 2013, a major flood in Calgary forced the evacuation of 80,000 people and resulted in one of the most expensive natural disasters in Canadian history. According to Policy Options Politiques, that event helped drive national discussions on flood risk and insurance coverage, including a federal roundtable in 2017 and the creation of a Task Force on Flood Insurance and Relocation. The task force released its final report in 2022.
However, Canada currently lacks a disaster risk-sharing framework between insurers and the government. A 2023 report by the C.D. Howe Institute linked this gap to high homeowner insurance premiums, which are among the highest in the OECD. Many other developed countries have systems in place that limit insurers’ exposure to catastrophic losses while maintaining consumer access to coverage.
Several complementary measures have also been recommended. These include restricting access to federal aid for households eligible for flood insurance, updating and publishing national flood risk maps, halting new development in high-risk zones, revising building codes to support climate resilience, and investing in both property-level retrofits and public flood infrastructure.
Without such changes, experts warn that coverage availability and affordability will continue to erode, placing greater strain on government resources. While natural disasters cannot be prevented, the financial risk can be managed through a more coordinated and sustainable approach, the report said.
