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Abstract In northern regions, river ice‐ jam flooding can be more severe than open‐water flooding causing property and infrastructure damages, loss of human life and adverse impacts on aquatic ecosystems. Very little has been performed to assess the risk induced by ice‐related floods because most risk assessments are limited to open‐water floods. The specific objective of this study is to incorporate ice‐jam numerical modelling tools (e.g. RIVICE, Monte‐Carlo simulation) into flood hazard and risk assessment along the Peace River at the Town of Peace River (TPR) in Alberta, Canada. Adequate historical data for different ice‐jam and open‐water flooding events were available for this study site and were useful in developing ice‐affected stage‐frequency curves. These curves were then applied to calibrate a numerical hydraulic model, which simulated different ice jams and flood scenarios along the Peace River at the TPR. A Monte‐Carlo analysis was then carried out to acquire an ensemble of water level profiles to determine the 1 : 100‐year and 1 : 200‐year annual exceedance probability flood stages for the TPR. These flood stages were then used to map flood hazard and vulnerability of the TPR. Finally, the flood risk for a 200‐year return period was calculated to be an average of $32/m 2 /a ($/m 2 /a corresponds to a unit of annual expected damages or risk). Copyright © 2016 John Wiley & Sons, Ltd.