IBC.Flood2019 Flashcards
Identify the 6 principles for the financial management of flood risk.
(SEA-FOI)
- Shield the taxpayer
- Efficiency
- Affordability
- Financially sustainable
- Optimal compensation
- Inclusivity
Briefly describe the “shield the taxpayer” principle.
Reduces taxpayer-funded subsidies by encouraging private insurance market.
Briefly describe the “efficiency” principle.
Should be risk-based to incentivize risk mitigation among stakeholders.
Briefly describe the “affordability” principle.
Ensures maximum participation by high-risk insureds.
Briefly describe the “financially sustainable” principle.
Reduce systemic losses to support sustainability.
Briefly describe the “optimal compensation” principle.
Insurance should be predictable & sufficient to reduce publicly funded disaster assistance.
Briefly describe the “inclusivity” principle.
All primary-residence property owners should be covered for any type of flood risk.
Identify the 3 prongs in Canada’s flood disaster risk reduction approach.
(AMI)
- Elevate risk AWARENESS / engagement
- Aggressively MITIGATE risk
- Improve risk IDENTIFICATION
Briefly describe the risk awareness prong.
Convey risk-assessment information to all participants during property development, transaction, financing and insurance processes.
Briefly describe the risk identification prong.
Continuously updated public-facing risk maps.
Briefly describe the risk mitigation prong. (2 elements)
Discourage building in high-risk areas, incorporate natural infrastructure to lower maintenance costs.
Describe the whole-of-society approach to financial management of flood risk and disaster risk reduction.
- Leverage gov partnerships in infrastructures to reduce climate risk in most exposed regions.
- Elevate risk awareness among consumers and businesses.
- Incentivize de-risking efforts among consumers and businesses
- Enable insurers to introduce new products and premium structures to encourage responsible behaviours.
What is the overall goal of the 2019 IBC Flood reading?
Present options for transferring residential property flood risk from the public sector to the private sector.
Identify the 3 options for the financial management of floods.
- Pure market solution (risk borne by homeowners)
- Evolved Status Quo (risk borne by blend of homeowners and gov through DFA)
- High-risk flood insurance pool (risk borne by blend of homeowners and gov through capitalization, not DFA)
In the pure market solution to flood risk, identify the 3 homeowners’ choices.
- Self-insure
- Purchase private insurance
- Relocate out of flood prone area
In the pure market solution to flood risk, does DFA play a role?
Government DFA programs provide no coverage.
In the pure market solution to flood risk, describe the 3 implications of risk-based premiums.
- Premiums would initially be unaffordable for many.
- Gov infrastructures development and buyouts of high-risk properties over time would lower costs and improve affordability.
- Gov could also introduce means-tested subsidies to increase participation rates.
Describe the international experience on the pure market solution to flood risk.
AUSTRALIA: participation rates are low among high-risk properties due to high costs.
GERMANY: gov was pressured into providing disaster assistance after major floods despite stated policy.
True or False?
In the evolved status quo solution, premiums are risk-based.
True.
Private insurance premiums are risk-based (private insurers accept flood risk according to their risk appetite)
Describe DFA involvement in compensation in the evolved status quo solution.
Gov DFA programs provide some coverage (specifically to uninsured high-risk properties where coverage is unaffordable)
Provincial DFA programs vary greatly among provinces so DFA compensation is not predictable.