Research story
The average annual cost of floods affecting homes in Canada is estimated at $2.9 billion. Floods are becoming increasingly common and intense and have major impacts on housing, society, the economy and the environment. Reasons that the costs of floods are on the rise include climate change, inflation and the growing number of homes being built in flood-risk areas. This is a complex problem that demands multiple, coordinated solutions and close cooperation among all stakeholders.
In the following interview, Mathieu Boudreault, a professor of actuarial science in the Department of Mathematics at the Université du Québec à Montréal (UQAM), explains why a collaborative, multidisciplinary approach is needed to tackle the problem of flooding. He also tells us about actuarial science and why it plays such an important part in the decisions that directly influence our collective resilience in responding to natural disasters.
Professor Boudreault, how did you get interested in actuarial science?
I had always been fascinated by mathematics, but when I got to Cégep, I developed a special fascination with probability and statistics, which led me to study actuarial science at university. I’m naturally curious, so as an undergraduate I did various research internships under an NSERC-funded research award. I then went on to complete master’s and doctoral degrees in actuarial science and financial mathematics. While doing my graduate studies, I also passed all of the exams required to become a Fellow Actuary—the highest level of certification in this profession.
When you study mathematics, you ask yourself, what can I do with my expertise? In my case, I wanted to use it to solve concrete problems, and that’s what got me interested in financial problems in the insurance field.
In your research, you investigate climate change, floods, finance and mathematics. How did you end up combining all of these interests?
The Canadian insurance industry and federal and provincial governments had been engaged in major discussions about establishing a national flood insurance program and ensuring its long-term viability. These discussions gave me the idea of examining the connections among these fields.
Usually, in actuarial science, we analyze data collected in the past in order to understand a given risk and how it might change in the future. But floods are fairly rare and are influenced in part by both climate change and land use, so we don’t have a lot of reliable historical data about them, which makes analyzing flood risks difficult.
So I thought it made sense to launch a multidisciplinary research project that would be grounded in actuarial science but also apply tools from other fields—a thoughtful combination of actuarial science, climate science and engineering.
The research findings from this project will be used to advance discussions about developing a flood insurance program that will be viable for Canadians. These findings will also help to guide public policy on the potential costs of floods in Canada.
In partnership with Public Safety Canada, the Insurance Bureau of Canada and researchers at UQAM, Université Laval and the University of Waterloo, you are conducting a research project on Canadian models for sharing risks in case of floods. This project is being funded by an NSERC Alliance grant. What are the advantages of this kind of multidisciplinary research?
If we want to make Canada and Canadian communities more resilient to climate change, then multidisciplinarity is the only way to go. For the research to have a lasting impact, the experts must talk to one another. That’s what led me to the Alliance program: I want to make sure that the results of this research can help inform decision-making.
To ensure that the knowledge acquired through this partnership would be useful to decisionmakers, we had to master the multidisciplinary side of this project. Through our research team’s efforts, we were able first to quantify the risks associated with floods and climate and determine the financial values associated with these risks, and then consider this information in developing public policies.
I have been very happy to see both the federal government and the property and casualty insurance industry play active roles in this project, through Public Safety Canada and the Insurance Bureau of Canada, respectively. I’m proud that our work has helped to advance the discussions and the development of recommendations that will benefit the Canadian public, in particular through the development of a national flood insurance program.
When you were analyzing the data on residential flood risks in Canada, what finding surprised you the most?
The first thing that surprised me was just how much the risks are concentrated on a very small number of properties. Our research shows that 80% of the financial risk is associated with only 10% of the homes, while about 40% affects just 1%. This raises some major questions from the standpoint of management and public policy.
The second thing was just how hard it is to access the data needed to do this kind of research. Even though we carried out our project over three years, we had to spend many months dealing with various people in government and the private sector to secure the right data.
As a researcher, I don’t face this kind of problem very often. This experience gave me a better understanding of how relationships between the federal and provincial governments and the private sector work. What I learned also changed the way that I structure my projects and influenced my subsequent research efforts.
How can mathematics help us to make decisions in the face of uncertainty, such as the risks of natural disasters?
Mathematics (in particular, probability and statistics) and physics play an essential role in quantifying the impacts of natural disasters. To quantify these impacts, we apply a modelling chain to simulate tens of thousands of possible realistic scenarios for floods or earthquakes. These simulations are used by federal and provincial governments, municipalities, the financial services industry and financial regulatory agencies to ensure the viability of financial institutions and to plan public policy and land use.
But when public policy and regulations fail to protect our most important assets, the collective resilience of our entire society suffers. We see such situations in many parts of the world, where poor land-use planning, insurer bankruptcies and inadequate regulation can leave disaster victims without financial assistance and force them to assume the costs all on their own. Mathematical models and high-quality data to use in them are thus essential to ensure resilience in the face of natural disasters and climate change.
How do you imagine the future of your research?
The Alliance grant project that my research team carried out in partnership with Public Safety Canada and the Insurance Bureau of Canada expanded our collaboration with the insurance industry and thus drew a fair amount of attention to our research. This project also contributed to the recent creation of the
This chair, which is funded by three of the largest property and casualty insurers in Canada, will let us tackle other research questions in partnership with these companies and other stakeholders, once again through a collaborative, multidisciplinary approach.
What I really want is to ensure that the actuarial profession can continue to have a positive impact on society. I hope that our work will help to better prepare Canadians to deal with the effects of climate change.
This interview has been edited for conciseness and clarity.
About Mathieu Boudreault
Mathieu Boudreault is a professor of actuarial science in the Department of Mathematics at the Université du Québec à Montréal (UQAM). He is also a Fellow of the Canadian Institute of Actuaries and the Society of Actuaries. His research interests include modelling and management of climate risks. He holds the