Canada’s Disaster Relief Costs Rise with weather trends

Federal Disaster Financial Assistance Arrangements (DFAA) are expected to substantially increase over the next five years, according to a report released today from the Office of the Parliamentary Budget Officer (PBO).

The PBO exists to provide independent analysis to parliament on financial issues. The main motivation for the report is the trend of growing costs associated with federal disaster assistance in Canada since the inception of the DFAA program in 1970, specifically those associated with an “increasing number of large weather events with increasing intensity”.

This trend is certainly no secret. For years, recognizable and trusted sources of scientific inquiry such as the Intergovernmental Panel on Climate Change (IPPC) have reported that the number and severity of extreme weather events will increase over the course of the 21st century[1], along with all the associated financial, social, and environmental impacts.

This seemingly unassuming report is in fact a significant milestone in Canada’s understanding of these events, and their very real current and potential future financial impact.

In fact, the approach incorporates some exclusive, detailed datasets to form a substantive and distinctly Canadian context. It utilizes historic trends of the number and financial payouts associated with weather events, as well as (very hard to come by) insurance data. In addition, the Public Safety Canada information is more complete and up-to-date than any current publicly available source.

The methodology is robust, and essentially follows the following process, which I’ve converted into diagram for your viewing pleasure:

The results, in short, show that the upward trend of payouts by DFAA is expected continue, in dramatic fashion. Table 1 below compares the past and predicted future trend:

Table 1: DFAA costs 1970-2014, and predicted costs 2016-2020. (Inflated to 2014 values using nominal gross domestic product):

In short, the significance of low probability, high impact events cannot be overlooked.Based on what little I know of budgetary process, and 2015–16 Government Expenditure Plan (estimates)[2], $902 million could account for up to 78% of the total budget allocation for ‘Public Safety and Emergency Preparedness’ for a single year. Bearing in mind that the figures given are estimates, and could be significantly higher or lower in any given year, this average is still worrying.

The report specifically cites a number of recent high impact events as additional drivers of the increasing average payment total. The most significant of these was the Southern Alberta and Southeastern British Columbia flood of June 2013, which is expected to reach a DFAA total cost of $1.347 billion. Needless to say this is significant.

The largest line item of the four ‘perils’ included is consistently flooding (by a country mile), with the total DFAA payment percentage fluctuating between 55-93% of the ‘4 peril’ total since 1970. The analysis of the report provides a fascinating and important overview of some notable Provincial flood management practices.

Table 2: Estimated DFAA average annual payments 2016-2020 ($ millions):

Ontario, for example, is noted for the significant restrictions and imposed on building within floodplains, and their management by conservation authorities. This approach seems to have mitigated a substantial amount of potential damage; while 90% of the population of Ontario live within watersheds, the total payments for the province constitute only 5% of the total, according to today’s report. This is compared with 28% and 25% for Quebec respectively. However, as the report also alludes to, flood management practice is significantly more complex than geographic placement within a watershed.

Ultimately the data is only useful if it informs practice. While this report is clearly directed to the federal government, the outcome of upcoming budgetary decisions may impact the way we do business in the field of disaster and emergency management. Keep in mind here that there are cost sharing arrangements between the federal and provincial governments, so if the strain on multiple levels of government could be set for a substantial increase.

I’ll be keeping my eye on this one!




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