Schedule 2: Insurability
Disaster Financial Assistance Arrangements Guidelines

On this page

• Purpose
• Policy intent
• Process
• Definitions
• Application
  • Adequate
  • Available
  • Self-insurance
  • Deductibles
  • Status of insurability

Purpose

The purpose of this Schedule is to provide further detail on insurability for the Disaster Financial Assistance Arrangements (DFAA), including considerations for eligibility, roles, and responsibilities. This Schedule clarifies how definitions for key terms such as "insurable," "available," and "adequate," are applied under the DFAA, clarifies Public Safety Canada's position on the eligibility of insurance, and provides guidance on scenarios involving self-insurance arrangements. Lastly, this Schedule serves as a repository for Public Safety Canada's current understanding of the insurance landscape in Canada, categorized by specific hazards, and outlines the process through which this understanding will be periodically reviewed and updated to ensure its continued relevance in guiding program decisions.

Policy intent

The DFAA does not cover insurable losses and is intended for contexts where traditional insurance markets and other sources of funding are unable to meet public needs following large-scale, distinct disasters stemming from natural hazards. When insurance options for a hazard are both available and adequate, costs that could have been covered by private or public insurance for that hazard are ineligible.^{Footnote 1} In such cases, individuals, organizations, communities, and governments are expected to seek and maintain insurance coverage for disaster related losses, either through the marketplace or via planned and adequately funded self-insurance arrangements, as a fundamental part of their risk management approach.

Process

Provincial/territorial governments are primarily responsible for regulating the insurance market within their jurisdictions, including but not limited to overseeing licensing, policy approval, consumer protection, market conduct, and dispute resolution to enable a stable, fair, transparent, and competitive insurance market.

Provinces/territories are expected to investigate the availability and adequacy of insurance in their regions on a regular basis and communicate their findings to Public Safety Canada, with supporting information and evidence used to make this determination (e.g., information about market penetration and pricing, analysis of trends from insurance denial letters, disaster recovery applicant surveys, etc.). For the purposes of determining eligibility under the DFAA, Public Safety Canada will review the province/territory's determination of insurability to ensure it meets the program's policy intent and definitions, and may seek professional advice as required (e.g., through the Insurance Bureau of Canada, insurers and academia). It is highly recommended that provinces/territories assess and communicate their findings on a regular basis, before disasters occur to avoid delays in assistance following a specific disaster event.

A baseline status of the general insurability of different hazards across Canada is provided in the Status of insurability section of this Schedule; however, provinces/territories are best positioned to make determinations of (un)insurability at the regional level. Where they are unable to make these determinations, Public Safety Canada will default to its baseline assumptions around insurability. At a minimum, provinces/territories must notify Public Safety Canada, before an advance payment is requested for an eligible disaster, whether they have a different determination of insurability status within the disaster's geographic area and provide supporting documentation to ensure this determination is considered as part of the advance payment process.

Definitions

As per Section 1 of the DFAA Guidelines, insurable means that "insurance coverage for the hazard causing the eligible disaster was available and adequate in the region that experienced the disaster, where:

• adequate means the insurance policy covers the required costs for the policyholder to repair or restore the asset to a functional level after a disaster, and
• available means the insurance for the specific natural hazard can be accessed on an annual basis at a generally affordable rate within the region as per Schedule 2: Insurability. This determination is made at the regional or community level, and not at the individual or property level

Insurable does not refer to whether an individual or entity chose to purchase insurance if it was generally adequate and available.

Per this definition, insurability is determined at the regional or community level, not at the individual level. Where households or entities cannot afford or choose not to purchase insurance that is otherwise generally available and adequate at the regional level, such considerations are matters of housing affordability or personal choice (respectively) and should be addressed through other mechanisms outside of the DFAA.

Application

Adequate

Further to the definition in the Guidelines, adequacy shall be viewed as a measure of whether insurance policies generally offered in the region for a particular hazard contain significant restrictions on coverage that would limit the policy holder from recovering to a functional level. If policies available for a particular hazard in a region are generally capped or limited to a coverage level that does not include the costs of reconstructing to a functional level, the policies would be considered inadequate.

Available

Further to the definition noted in the Guidelines, availability shall consider the following:

• Market presence: Insurance options for the hazard must be present in the market and offered by at least one provider comprehensively, or multiple providers
• Pricing: Premiums and deductibles must be reasonably priced relative to the value of what is being insured. Different metrics on pricing reasonability may be appropriate depending on the nature of the hazard or the type of asset (home, business, or infrastructure), and (as mentioned previously) should be determined at a regional level in terms of the pricing that is generally available in the area. Provinces/territories are free to apply a specific evidence-based threshold/metric for the reasonability of premiums and deductibles in their regions, on the basis of the value of the product, not the purchasing power/income of the community. Such methods will be subject to confirmation by Public Safety Canada to ensure alignment with the definitions and policy intent of the DFAA as well as broader federal disaster financing objectives, and to limit distortion and impacts to available insurance market(s)

Availability can be highly influenced by geography, historical events, and other factors, and therefore regional differences may exist for certain hazards. For example, general insurance (including fire) may be unavailable for some remote communities that do not have fire stations or fire suppression infrastructure. Where there are issues related to the availability or affordability of general home insurance, provinces/territories have the responsibility and the regulatory tools to resolve this, and this is not something that should be left to the DFAA (in part because the DFAA may or may not apply to hazards that impact those communities, and people should have consistent access to financial protection). However, should communities still be left without available and adequate insurance, provinces/territories can provide confirmation of the (un)availability of insurance in these regions to Public Safety Canada to determine whether such communities can qualify for DFAA assistance for damaged properties.

It is recommended provincial/territorial officials work closely with their insurance regulators and the insurance industry to determine adequacy and availability within their regions, and work through available mechanisms to resolve gaps and issues as they are identified.

Self-insurance

Self-insurance is the setting aside of funds, either in a formal or informal manner, to pay for possible losses instead of purchasing insurance from traditional insurance markets. Choosing not to insure is also considered a form of self-insurance. The choice between self-insurance and buying traditional insurance lies with each individual or entity, and requires careful consideration of their risk tolerance, financial resources, and the specific risks involved.

Where coverage for natural hazards is available and adequate through traditional insurance markets and individuals, organizations, communities, and governments elect to self-insure, such losses are not eligible under the DFAA.

Deductibles

A deductible is the amount of an insurance claim that the insured is responsible for and the company deducts for payment. Insurance deductibles are ineligible under the DFAA. This helps ensure that policy holders continue to seek out insurance options that are appropriate to meet their post-disaster needs and avoids market distortion. This also ensures that the DFAA is not creating an incentive to seek out the lowest premium at the expense of a high deductible which may not be affordable for policy-holders when hazard events are not eligible for the DFAA.

Status of insurability

This section outlines Public Safety Canada's current baseline understanding of insurability status by hazard type. This understanding will be reviewed on an annual basis, and updated to reflect regional differences as additional information becomes available from provinces/territories and industry partners.

Date of application: April 1, 2025

Earthquakes – Insurable

Earthquake coverage is generally considered available and adequate across Canada. If there are areas in which exceptions to this apply, provinces/territories are advised to confirm the status of insurability on a regional basis, and provide the information to Public Safety Canada for confirmation.

Flooding – sewer backup – Insurable

Flooding – overland – Variable

In low and medium risk areas, overland flooding is generally considered insurable, as policies tend to be widely available and adequate.

In high-risk areas, overland flood insurance is considered not available and/or not adequate, and thus is generally not considered an insurable peril under the DFAA.

Note that some insurance policies on sewer backup exclude coverage when the sewer backup is caused by an overland flood event or when sewer backup and overland flood losses are combined. In such cases, the DFAA treats losses like overland flood damage and would consider the cumulative losses uninsurable.

Fire – Insurable

Fire is considered widely insurable in Canada, given it is included in general insurance policies. Rare exceptions may exist for specific contexts such as when insurance is simply not available in remote communities due to a lack of fire stations or fire suppression infrastructure. Exceptions may also apply for some public sector assets.

Hail – Insurable

Wind – Insurable

Landslides – Unknown

Date modified:

2025-04-29