The focus of this site is on recovery assistance within Canada, which includes actions to repair or restore conditions to an acceptable level. In responding to emergency events, municipalities and provinces and territories determine first response and how resources are allocated at the local level. Public Safety Canada and the federal government do not determine how these resources are allocated. Beyond that, adverse selection would have been more serious than it is now.
Writing flood insurance requires good knowledge of flood risks, which would have been costly or impossible to obtain without accurate flood maps and reliable knowledge of flood return periods.
Perhaps, tired of waiting for government to take advantage of this, the Canadian insurance industry has taken the opportunity to generate property-level flood risk data itself, which may be one reason why the logjam has been broken and so many insurers have recently begun to offer flood insurance in Canada.
Both the DFA coverage given to households and firms and the DFAA coverage to the provinces charge no premiums, which is very unlike private insurance. This is similar to what is seen in some areas of public insurance in Canada, notably health care.
How does making insurance free affect efficiency? On one hand, it makes it irrational for anyone not to accept coverage and therefore eliminates the adverse selection problem. On the other hand, it does nothing to reduce moral hazard and, because it results in more people having insurance, it may increase the welfare losses created by that problem.
So it is not clear whether providing free insurance increases or reduces welfare. Although the DFA system does not provide full coverage for all disaster damage, it can be regarded as an imperfect public insurance scheme.
Given that private insurance is unavailable in some cases, for example in very high-risk flood zones, it could theoretically provide an overall welfare gain.
Determining whether that is the case would be very difficult, because it would require a full accounting not only for the costs of the system but for its benefits. The latter are difficult to assess because they are largely unobservable. Although the benefits of the DFA system would not be easy to assess, something can be said about the social costs. First, there is an excess burden imposed by the taxes that must be paid to fund the system.
In addition to this excess burden of taxes, there is clearly also a social cost in the form of the excess flood damage caused by the building in flood zones that would not have occurred in the absence of DFA.
I have shown that the true total disaster damages may be up to two times that amount. Although efficiency aspects are important, equity aspects may be equally or more important here. The DFA system has both horizontal and vertical equity issues.
On the horizontal equity side, public disaster compensation implies a transfer from people who live in less risky areas to those in more risky areas. Concern about this redistribution may well be more acute among the public than efficiency concerns. A possible rejoinder is that the advantage of compensation can be expected to be capitalized in property values.
It might be thought that if the risk of disaster was not changing over time, the true DFA beneficiaries would have been the owners when the DFA system was introduced or those who built in the floodplain later. Many current owners would not be in either category, so they may not truly benefit from DFA redistribution and could be viewed as undeserved losers if the system were abolished. Against this, with disaster risk currently apparently rising unexpectedly, the capitalized value of DFA compensation should also be increasing—which could be regarded as an undeserved benefit to current owners that could be equitably withdrawn.
Also on the horizontal equity side, it can be pointed out that the provinces vary in the size of their DFAA claims. Thus, for example, Manitoba and Nova Scotia—provinces with similar per capita income, benefit differentially from DFAA assistance because Manitoba has major rivers that flood frequently and Nova Scotia does not. On vertical equity, I have noted that the non-eligibility of luxury assets and the caps on payouts in nine out of ten provinces mean that DFA is to some degree targeted at lower income property owners.
As pointed out earlier, these features make the disasters roughly akin to progressive wealth taxes in the affected areas. Leaving aside the effects of disaster assistance, however, lower income groups are still often reported to suffer more from flooding and other disasters than higher income groups, as in the cases of Hurricane Katrina in New Orleans in and Hurricane Sandy in New York in Cohen and Liboiron ; Logan This difference is partly due to the fact that lower income people may suffer more from the non-capital damages caused by disasters.
Larger impacts for these groups can occur as a result of such problems as borrowing constraints, physical immobility, social isolation, lack of information, or poor health Oulahen, Mortsch, et al. The remedies for these problems lie partly in having high-quality emergency services available to all. However, there is also a DFA aspect. Delay in disaster assistance payments is a common problem, and the delays tend to be longer for larger disasters because of the high volume of claims.
For those who are borrowing constrained, that is a major problem, whereas for wealthier people it is likely to be a less serious concern. A further significant vertical equity aspect is that, in some areas, low-income people are over-represented in flood zones. A historical settlement pattern in many towns and cities was for high-income people to locate on high ground and for low-income people to build in the floodplain.
In addition, some First Nations with relatively low income have reserves that are vulnerable to flooding Patrick However, the pattern of populations in flood zones being skewed toward lower income is not universal, 9 and this pattern has also tended to break down over time because of improvements in transportation, communication, warnings, and emergency response that have made it much easier to escape bodily harm and certain other forms of damage in disasters.
The amenity value of rivers has induced more wealthy people to build large homes in areas of flood risk. In the severe flooding seen in the Calgary area in and in Quebec and New Brunswick in and , people from all income groups were affected. An example of how settlement patterns have changed over time is provided by Greater Vancouver. European settlement in this area originally took place almost exclusively on high ground, the threat from Fraser River flooding being sufficient to deter all but farmers, fishermen, and a few others from locating in the floodplain.
It was only when the high ground was completely occupied and dikes had been built that large-scale residential development began in the floodplain. Today, about 20 percent of the population of Greater Vancouver live in the floodplain, and there is relatively little difference, overall, in demographic or economic characteristics between the people living in the floodplain and those on higher ground Davies and Black Some of the provinces that benefit the most from the system have below-average per capita income.
Over a longer horizon the picture is different. Hence, if anything, over the longer run the interprovincial incidence of the DFAA system appears to have been progressive rather than regressive.
They are currently most important in the flood realm. What do other countries do in this area? They implement a wide variety of approaches. Insurance can be private or public and voluntary or compulsory. Every possible combination of these options is in force somewhere. In Europe, flood insurance is public and mandatory in France, whereas it is private and optional in Germany.
In the United Kingdom, it is private, but there is some coordination between the insurers and government. Flood insurance is provided through normal home insurance in low-risk areas.
Under the Flood Re program, launched in , insurance is also provided in high-risk areas, which include about 2 percent of all homes Association of British Insurers ; Van Dijk Flood Re is a not-for-profit scheme, run and financed by insurers, which will cover all but the most extreme floods—those with a return period of years for which government would presumably provide compensation.
Effectively, low-risk households subsidize high-risk households under Flood Re, although premiums are higher in the high-risk areas. The United States has its publicly funded but privately administered National Flood Insurance Program NFIP , targeted at high-risk areas but available to households outside those areas as well. About half the houses in special flood hazard areas have NFIP coverage, whereas coverage is only about 1 percent elsewhere.
In Canada, the recent thrust has been to move from reliance on DFA to private flood insurance, and so far the latter has been left optional. It seems unlikely that the country will head in the direction of public flood insurance i.
The open questions would appear to be whether politicians can be trusted to deny DFA to the uninsured in cases in which flood insurance was reasonably and readily available and what should be done in the high-risk areas where private insurers are unlikely to offer flood insurance without some assistance from government. A joint government—industry group, the National Working Group on Financial Risk of Flooding, began to study the latter question in Although it has generated a major research report IBC , as of the time of writing this group had not yet made its final recommendations.
There is an argument for trying to make flood insurance universal or near-universal in areas with flood risk. As I have shown, the provinces are moving in the direction of refusing DFA to the uninsured where flood insurance was available. The problem is that when there is a large flood, politicians may be tempted to break with the policy. Ensuring that flood insurance is universal, or nearly so, in flood zones would circumvent this problem.
This could be achieved by requiring that all home insurance policies in these areas cover overland flooding. There remains the issue of what to do about high-risk areas. The experience in other countries, particularly the United Kingdom and the United States, suggests that the solution is for flood insurance in high-risk areas to be subsidized—either by low-risk policy holders, as in the United Kingdom, or by government, as in the United States. Subsidy by low- or no-risk policy holders seems dubious on horizontal equity grounds.
A concern with subsidizing insurance in high-risk areas is that the burden of the insurance premiums by itself will not be sufficient to induce optimal private mitigation in, or retreat from, those areas.
Voluntary buyouts can compensate for this to an extent, but their low take-up rates in the past suggest they are not enough. Compulsory buyouts in some very high-risk areas are likely warranted. In addition, when insurance is first provided in high-risk areas, the subsidy rates could be announced together with a schedule of future rates that would decline over time. Eligible expenses include, but are not limited to, evacuation operations, restoring public works and infrastructure to their pre-disaster condition, as well as replacing or repairing basic, essential personal property of individuals, small businesses and farmsteads.
For further information on eligible expenses, please consult Appendix B. Once the threshold is exceeded, the federal share of eligible expenses is determined by the formula in Table 8. The formulas will be indexed to inflation annually based on the consumer price index published by Statistics Canada.
Eligible items for agricultural operations may include damaged fencing, bales and field erosion. Non-profit organizations To be eligible, the non-profit organization must be: A registered charity within the meaning of the Income Tax Act Canada ; Incorporated or continued pursuant to an Act or Act of Parliament of Canada for the purpose of providing social, charitable or recreational services; or An organization that provides a service or benefit to the community on a not-for-profit basis.
Provincial and regional parks Regional park authorities may be eligible if the total loss or damage to property owned by or under the control of the park authority is equal to or greater than 0. Any park authority other than a regional park may be eligible if the total loss or damage is equal to or greater than 0. Limitations PDAP is not a substitute for private insurance. PDAP does not provide full compensation for losses. PDAP provides assistance to return property to its pre-disaster condition only.
PDAP does not cover any insurable losses — including loss of production, loss of revenue or unseeded acres of agricultural land. PDAP does not provide financial assistance for drought. Fire-related losses are not covered, although in extreme cases the following assistance may be made for wildfires: Dangerous tree removal; and Pre-emptive measures to protect eligible property as the wildfire approaches, such as firebreaks, fireguards and sprinklers.
Top 3. How to Apply. Apply within six 6 months. The sooner your application is received, the sooner you may receive assistance. Include all required documentation. Please refer to the publication Required Documents for a list of documents for principal residence, agricultural operation and small business claims.
Top 4. Documents needed If you have private insurance, your insurer must provide a letter to PDAP explaining which of your damages are and are not covered by your policy. Principal residence In addition to your insurance denial letter and photos of all damages, you will need: A copy of your driver's licence Rental agreement for tenants Agricultural operation In addition to your insurance denial letter and photos of all damages, you will need: A copy of your prior year's T1 General income tax return s submitted to the Canada Revenue Agency CRA ; the return s must include any Statement of Farming Activities T schedules If filing as a limited corporation — a copy of the prior year's T2 Corporate Tax Return s including Schedules 1 and Unaudited Financial Statements are not sufficient A copy of the lease agreement if your business is located in a rental property The CRA Notice of Assessment that corresponds with the either the T1 or T2 tax return s Non-profit or charity claim In addition to photos of all damages, you will need: Tax return indicating gross income Proof of charitable status documentation or registration information A mission statement Your insurance denial letter, which is addressed to the claimant on the insurer's letterhead not the broker's , and includes the policy number, date of loss, the locations of the loss and a statement indicating that the claimant does not have coverage and that coverage was not available for purchase for damages as a result of the weather event Take photos Don't forget to take pictures of damages to your property.
Avoid delays It is important to us that claimants receive eligible financial assistance as quickly as possible. Top 5.
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