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Examen 6 Partie B > Swiss Re > Flashcards

Swiss Re Flashcards

1
Q

Provide Federal Government Initiatives related to Flood Management. Also provide the year of implementation of each initiative

A

1953 - Canada Water Conservation Act
1970 - Canada Water Act
1970 - Disaster Financial Assistance Arrangements(DFAA)
1975 - Flood Damage Reduction Program(FDRP)
1980 - Joint Emergency Preparedness Program(JEPP)
2008 - National Disaster Mitigation Strategy(NDMS)

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2
Q

Briefly describe the roles and current status of the Canada Water Conservation Act of 1953

A
  • Provided cost sharing arrangements between fed govt and prov for structural flood control measures
  • Funding provided only for structural adj
  • Clarified roles of all levels of govt
  • Ensured higher levels of govt became involved in flood management
  • First fed legislation directly concerned with water management

*Repealed after enactment of the Canada Water Act

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3
Q

Briefly describe the role and current status of the Canada Water Act of 1970

A
  • Supported joint fed-prov initiatives
  • Allowed for funding of non-structural measures
  • Allowed for implementation of FDRP and JEPP

*Currently in place

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4
Q

Briefly describe the role and current status of the Disaster Financial Assistance Arrangements (DFAA) of 1970

A
  • Standardized disaster recovery cost-sharing between the fed govt and the prov
  • Provides partial compensation for disaster recovery to prov govt, based on DFAA guidelines and criteria
  • Currently in place
  • Revised in 2008 as part of NDMS to allow for some mitigation funding – allows for 15% additional payment for mitigation measures
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5
Q

Briefly describe the role and current status of the Flood Damage Reduction Program (FDRP) of 1975

A
  • Enabled resource sharing between fed govt and prov for the purpose of creating flood hazard maps
  • Resulted in the mapping of floodplains in hundreds of Canadian communities
  • No 10-year agreements renewed for prov or territories
  • Fed govt involvement wound-down as of the early 2000s
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6
Q

Briefly describe the role and current status of the Joint Emergency Preparedness Program (JEPP) of 1980

A
  • Provides partial financial assistance for emergency preparedness planning
  • Assistance to muni is provided through prov govt

*Currently in place

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7
Q

Briefly describe the role and current status of the National Disaster Mitigation Strategy (NDMS) of 2008•

A
  • Intended to coordinate piece-meal mitigation undertaken by lower levels of govt across the country
  • Supports all-hazard mitigation at local, prov level
  • When implemented, may serve to fill gap left by withdrawal form FDRP
  • Initial discussions held by PSC and IBC (1998 and 2002)
  • Strategy document released in 2008
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8
Q

Provide Factors that led to the creation of the Flood Damage Reduction Program (FDRP)

A

1 - Increasing pop in urban areas, potentially flood-prone areas
2 - Pressure to manage flooding on limited budgets
3 - Subsidization of those living in flood-prone areas
4 - Evidence that structural measures led to the increase in value of floodplain properties, leading to dev in those risky areas
5 - Evidence that gov reliefs to floodplain encouraged devt in those risky areas

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9
Q

Provide Goals of the Flood Damage Reduction Program (FDRP)

A
  • Discourage dev in flood-prone areas
  • Increase coordination of fed and prov flood strategies
  • Promote long term flood damage reduction
  • Increase stakeholder awareness of flooding
  • Policies and program related to flooding
  • Increase knowledge of the location of flood-prone areas
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10
Q

Provide Characteristics of provincial governments relief programs

A
  • Available only for uninsurable damages
  • Coverage generally limit (cap, deductible, restriction)
  • Available only to HO, small business, farms and muni gov
  • Usually applied only when flooding is widespread
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11
Q

Briefly discuss the state of Homeowners insurance coverage for flooding in Canada

A
  • Vast majority of insurers do not cover flooding. Some rare insurers cover flood through endorsements
  • Canada is the only G8 country in which flood insurance is not available to HO
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12
Q

Contrast the types of water peril offered in Quebec and Canada

A
  • Qc: Optional Water Damage Endorsement to cover sewer backup and water above ground. Specifically excludes flood
  • Rest of Canada: No water damage covered except water main and plumbing
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13
Q

Discuss the state of Commercial Insurance Coverage for flooding in Canada

A
  • No obligation for insurers to adopt the IBC model commr policy wordings, and coverage provided by insurers differs
  • Commr insurance customers can purchase flood insurance from insurers as an endorsement
  • Flood insurance is heavily UW, but there are almost no incidence of flood claims
  • Flood maps are used to UW flood coverage for commr customers
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14
Q

Provide Categories of flood insurance programs internationally and provide an example of country using it

A
  • Public and bundled (France)
  • Public and Optional (US)
  • Private and bundled (UK)
  • Private and Optional (Germany)
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15
Q

Provide and briefly describe Conditions that must be in place for a peril to be insured

A
  • Randomness
  • Assessability
  • Mutuality
  • Economic viability
  • Need
  • Similarity of threats
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16
Q

Briefly discuss condition that must be in place for a peril to be insured: Randomness

A

Event must be indep of the will of the insured, and the time at which the insured event occurs must not be predictable
• Present to a certain extent, however, some flood losses occur very freq and may not be considered as random
• If those who have a predictable are excluded from coverage; the condition can be met

17
Q

Briefly discuss condition that must be in place for a peril to be insured: Assessability

A

Peril must be assessable in terms of possible losses
• Modeling methods exists that allows for statistical assessment of flood magnitude and freq
• Large-scale flood events are more difficult to assess

18
Q

Briefly discuss condition that must be in place for a peril to be insured: Mutuality

A

Large number of risk to create risk community
• A challenge for flood insurance, as only a limited pop may be formally defined as exposed to flood
• Most important reason why flood insurance is not available in some countries
• Concern is most often resolved through bundling of coverage.

19
Q

Briefly discuss condition that must be in place for a peril to be insured: Economic viability

A

Risk community must be able to cover flood-loss financial needs
• Threatened when extremely large loss events affect an area with a large concentration of PHs
• If only those at risk are insured, Pr would have to be extremely high to cover potential flood losses
• Re can play a role in reducing risks

20
Q

Briefly discuss condition that must be in place for a peril to be insured: Need

A

Need for insurance cover

• A need for coverage of flood damage exists, as flooding often results in serious damages

21
Q

Briefly discuss condition that must be in place for a peril to be insured: Similarity of threats

A

Risk community must be exposed to the same threat
• Common cause of damages is water
• Damage are similar in each case
• Similarity of threat is present

22
Q

What is the primary problem with the optional flood coverage approach?

A

Adverse selection
• Insurers may offer the policy only in areas considered to be safe
• Consumers may purchase the policy only in areas that are prone to floods

23
Q

What is the advantage of the bundled flood coverage approach?

A

A large community of low risk client will have to purchase flood insurance, overcoming the problem of Mutuality and Economic viability

24
Q

How must a bundled flood coverage approach be designed in order to be more equitable?

A

Risk-based pricing
• Lower risk will pay less, those with higher risk will pay more
• Subsidization of higher risk by lower risk will be reduced

25
Q

What are the objectives of the NFIP?

A
  • Identify flood hazard areas
  • Mitigate flood risk through local flood plain devt
  • Spread risk through insurance
26
Q

What are the issues with the US flood insurance system?

A
  • Mutuality: only those in flood areas are required to purchase insurance
  • Economic viability: these areas are subject to adverse-selection
  • Assessability: as maps that are more accurate are required to identify flood risk
27
Q

Provide one advantage and one disadvantage of the French CAT Naturel System for insuring natural disaster

A
  • Advantage: No adverse-selection

* Disadvantage: Same rates are charged to everyone, leading to high subsidization of high risks

28
Q

Provide Reasons why UK approach to flood insurance provides the best example on which a Canadian model may be based

A

• Bundled approach helps reduce the adverse selection and affordability issue
• Option of excluding very high risk HO
• Partnership between insurer/govt/HO
• Agreement between insurers/govt on each responsibilities
• Risk-based flood insurance pricing
• Participation of individuals in flood management through risk mitigation of their properties
• Private program supported by govt flood risk reduction actions
• Govt responsibilities includes:
1) Guaranteeing quality flood maps
2) Adequate flood defence
3) Effective land use

29
Q

Provide Proposed solutions for flood insurance in Canada

A
  • Applied at the provl level, rather than the fed level
  • Flood coverage should be extended to as many types as possible
  • Moral hazard and risk based pricing
  • Coverage should be extended to as many low risk customers as possible
  • Excluding high risk HO
30
Q

Provide Advantages of: Flood coverage should be extended to as many types as possible

A
  • Would reduce discussions about which type of flooding caused what damage
  • Increase consumer satisfaction with flood insurance, and help to ensure that positive consumer perceptions of the insurance industry are maintained
31
Q

Provide Advantages of: Moral hazard and risk based pricing

A
  • A necessary condition to attain economic viability of insurance coverage and ensure that individuals understand their risk
  • Higher risk of damage should pay more to ensure that cross-subsidization between low and high risk is limited
  • Serve as an incentive for individuals to undertake risk mitigating adj or to avoid risky behaviour
  • Deductibles will help keep premiums affordable, but will also ensure that those at greater risk of flooding are carrying a greater flood damage burden
32
Q

Provide Advantages of: Excluding high risk homeowners

A
  • Reduce devt of high flood risk areas
  • Reduce burden on the community after a large flood
  • Ensure that insurance for low risk HO is affordable
33
Q

List the role of the insurance industry in effective flood insurance model

A
  • Provide bundled flood coverage to all HO
  • Apply risk based insurance premiums/deductibles
  • Keep track of envt and structural changes to watersheds and streams that have implications for the flood risk of their PH
  • Participate in flood risk comm with PH, including possible damages and mitigate options
  • Ensure PH are aware of the characteristics of their insurance coverage
  • Ensure PH are aware of changes in their coverage, and why their coverage may change over time
  • Monitor their accumulation of flood risk
34
Q

List the role of governments in effective flood insurance model

A
  • Comprehensive flood hazard identification
  • Working to reduce flood risk for all Canadian HO
  • Increasing public awareness of flood risk
  • Ensuring that public disaster relief programs do not conflict with the flood insurance program
35
Q

List the role of homeowners in effective flood insurance model

A
  • Implement appropriate flood damage mitigation
  • Retention of some of the damage costs
  • Risk based premiums and deductibles ensure that higher risk property owners retain a higher proportion of the costs
36
Q

Briefly describe why flood insurance should not be regulated.

A
  • Private insurers can more accurately determine prices that appropriately reflect the risks than govt
  • Under-pricing by private insurance cies can result in insolvency, providing a strong incentive to ensure adequate prices
  • Regulation of insurance pricing consistently reduces the effectiveness of coverage
  • Insurance regulation in Canada should continue to focus on solvency and market conduct and not interfere with pricing

Examen 6 Partie B (12 decks)

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