Homeowners caught off guard as insurance companies rethink policies — here's what's happening

Homeowners near the Shubenacadie Lakes System in Nova Scotia are learning that their properties belong to a high-risk area more recently prone to major flooding, Insurance Business Canada reported.

This complicates homeowner insurance coverage and availability as homeowners navigate how to best protect their properties in the face of increased climate risks. 

What's happening?

A 2020 Halifax Regional Municipality study identified the Shubenacadie Lakes System as a high-priority region for flood mitigation. Using advanced computer mapping models, water resource engineers were able to identify which areas and properties would be most affected by potential floods in the region. 

The study found that more than 1,200 properties fell within the immediate vicinity of flood-prone zones. 

The study mapped the flood risk of these properties using models of one-in-20-year and one-in-100-year flood events. A one-in-20-year flood has a 5% probability of occurring any given year. A one-in-100-year flood, also referred to as "base flood" by the Federal Emergency Management Agency, has a 1% chance of happening any given year. 

Insurance companies use these models and standards to determine whether to offer flood insurance to property owners — and if so, how much to charge for premiums. 

Although this Halifax study was published in 2020, many affected homeowners are only learning about its implications now. Homeowners are getting in touch with their insurers to add on flood insurance, which is sold separately from regular homeowner insurance. Insurers can deny flood insurance plans if the property belongs to a high-risk flood area. 

An additional 900 properties were identified as high-risk in a flood study of the Sackville Rivers, according to Insurance Business Canada. 

Why is flooding concerning?

Parts of the world are experiencing serious drought conditions, while others are drowning in torrential downpours. One thing is for certain: extreme weather events are becoming more frequent and intense, and they are mostly unpredictable. 

While extreme weather events have always occurred naturally, they are exacerbated by human activity — burning dirty fuels for energy, which contributes to rising global temperatures. 

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Nova Scotia, which is almost completely surrounded by water, is already prone to flooding from its coastlines and inland flooding from snowmelt. Heavy rainfall from extreme weather events like hurricanes and tropical cyclones also contributes to increased flood risk.

Homeowners whose properties fall within flood-prone areas risk losing or damaging their properties to foreseeable floods. Those who haven't added flood insurance may now be denied by insurers due to the heightened flood risk, leaving them vulnerable in the face of increased climate risk. 

For many homeowners in the United States, this isn't a new trend. Insurers have refused coverage for homeowners who live in high-risk areas, or have hiked their premium rates to unbelievable levels. 

What's being done about flood risks?

The 2020 Halifax study provided key information on which areas and properties would be most prone to flooding. Based on the study's findings, the municipality can better anticipate and protect against flood events. 

For example, Halifax can restrict building and development in neighborhoods where flood risk is high, saving new properties from being damaged or destroyed. For already-established homes in high-flood-risk areas, the municipality can adapt building codes to defend against potential floods. For example, building codes could require that properties be elevated to minimize property damage from flood events. 

Minimizing the risk and destruction of foreseeable flood events will make it much less risky for insurers to provide flood insurance to homeowners, ensuring they have coverage when they need it.

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