This opinion piece by Dr. Jason Thistlethwaite, professor in the School of Environment, Enterprise and Development, and Dr. Daniel Henstra, professor in the Department of Political Science, recently appeared in the Hill Times.
Thistlethwaite and Henstra are co-leads of the Climate Risk Research Group, and their flood protection policy brief is part of the Waterloo Climate Institute's ongoing policy brief series, which aims to inform and influence climate-related decision-making in Canada.
Flooding is already Canada's most costly natural hazard, and the threat is only growing. Climate change, aging infrastructure and unrestrained development in flood-prone areas have left millions of Canadians vulnerable.
With the federal government moving ahead on a national flood insurance program, we need to take the next step: establish a Canadian Community Rating System that rewards communities with lower insurance costs for protecting their residents with local flood protections. That could make flood insurance more affordable and sustainable and avoid leaving taxpayers to pay the bill the next time a flood disaster occurs.
About one in ten Canadian homes is in a high-risk flood zone and account for up to 90 per cent of residential flood damages, which range between $1.4 billion and $3 billion each year. Yet more than 90 per cent of the people living in these areas don't know they're at risk. Insurance is either unavailable or so expensive that many households go without it. When disaster strikes, families are forced to rely on limited disaster relief programs, while making up the difference out-of-pocket.
This is not a long-term solution. While a national flood insurance program can close the protection gap for high-risk homes, unless communities take steps to reduce their exposure, costs will only escalate. That's where a Canadian Community Rating System comes in.
The United States has used such a system for decades. Under the U.S. model, municipalities that adopt flood mitigation measures such as better stormwater management, public education campaigns or stronger land-use rules earn their residents discounts on National Flood Insurance Program premiums. For instance, policy-holders in Fort Myers, Florida will receive a 20 per cent discount on their premiums this year thanks to several capital improvement projects the city invested in to mitigate flood damage. It's a simple but powerful incentive: the safer a community becomes, the more its households save. And studies show that U.S. communities participating in the program experience fewer flood losses than those that don't.
Canada has an opportunity to do even better. A Canadian system could correct some of the flaws of the U.S. model, which has often favoured wealthy municipalities with the staff and resources to navigate a complex application process. Without careful design, smaller, rural or Indigenous communities risk being left behind.
That's why equity must be built into the Canadian version from the start. The system should provide technical support and capacity-building grants so that under-resourced municipalities can participate fully. And it should reward actions that protect vulnerable populations, not just wealthier neighbourhoods with expensive homes.
The benefits would extend well beyond insurance premiums. A Canadian Community Rating System could encourage nature-based solutions, like restoring wetlands that absorb floodwaters, or strategic retreat from the most dangerous zones. It could also strengthen local governance by aligning flood risk planning with federal and provincial funding frameworks. Most importantly, it would help ensure that resilience is built where it's needed most before disaster strikes, not after.
This isn't an abstract policy discussion. Canadians have already witnessed the staggering human and economic toll of floods, from the 2021 disaster in British Columbia's Fraser Valley to more frequent urban flash floods across the country. With Canada ramping up housing construction to meet demand, the risk of building new homes in harm's way is rising. Unless we take smarter, locally informed action, today's flood damages will seem small compared to what lies ahead.
A Canadian Community Rating System would help break the cycle of flood, rebuild and repeat. By tying financial savings to real reductions in risk, it creates lasting incentives for communities to make better choices. It would also make the federal insurance program more sustainable by easing pressure on public funds.
We can't insure our way out of the flood crisis. But we can design smarter policies that combine protection with prevention. The federal government has already committed millions to launching national flood insurance. The next step is to make that investment count.
Ottawa, working with provinces and municipalities, should introduce a Community Rating System that rewards communities for building resilience. Doing so will ensure every dollar spent on insurance also encourages safer, stronger and fairer communities.
