In an unusual move, the Federal Government announced Tuesday it is capping the flood insurance rates for properties that flood.
The new rule means homeowners who receive flood insurance will be charged $1,000 per square metre of land.
This comes after the Federal government introduced a temporary cap on insurance rates in 2015.
The policy limits how much insurance a homeowner could receive from the insurer if they paid the first $100,000 of their property’s cost.
That was $100 for the first five years, $200 for the second five years and $400 for the third five years.
The rate for the fourth year will rise to $1.3 million.
The cap will not apply to properties that have flooded more than 10 times in a year.
“It’s a Catch-22, it’s a very complicated problem,” said Paul Mascarenhas, vice-president and chief executive of the National Association of Home Builders.
“We have to work with the insurance companies to make sure that they do the right thing and that they have a cost-effective system.”
Mascareias association estimates that between $300 million and $350 million will be lost to flood insurance if the cap is introduced.
“I’m not sure we’ve really got a solution for that yet,” he said.
“The more that we can do to get that system in place and work with insurance companies, I think that will be beneficial.”
But Mascares association president Doug Lea said he would have liked to see more options for homeowners.
“You’d think that in a world of so many variables, people would be able to find a way to pay for that kind of cost-effectiveness,” he told CBC News.
“In this country, where we have an insurance system that is very expensive, people should be able get that cost-benefits, even if it’s in the form of a policy that they pay out over and over again.”
The federal government has also announced a $30,000 surcharge for people who are at risk of being fined if they fail to pay flood insurance premiums.
The surcharge will apply to residential properties with flood water in the last three months of the year, as well as to those that were in floodwaters at least three times in the past 12 months.
“People should be encouraged to pay their flood insurance,” said Lea.
“If they do not, then you have to look at fines and penalties and that could lead to them losing their property.”
The Government’s decision is the latest in a series of moves that have put the spotlight on flood insurance policies.
The Liberal government has introduced new rules requiring flood insurance providers to post flood damage notices on the flood damage website and on flood-related notices in local newspapers and on the internet.
The rules also require flood insurance companies provide an online flood insurance calculator.
The insurance industry has also been working to make flood insurance more affordable.
The Insurance Bureau of Canada estimates that the cost of flood insurance for properties of less than $200,000 could increase by $400 to $500 a year under the new rules.