There have been floods somewhere in the UK every month for the past 32 months.
The cost to UK plc of the Autumn 2000 floods was over nearly one billion pounds. Nearly two million homes (equivalent to the entire population of the South West of England) and 130,000 commercial properties, worth over £200 billion, are at risk from flooding (DEFRA 2001). Over one million hectares of farming land, worth a further £7 billion, are also at risk. (MAFF July 2000)
Better planning controls for new developments on flood plains, robust national flood plans including improved systems of flood defence planning and adequate funding are required to enable defences to be put in place.
This briefing paper sets out Norwich Union's argument for a more joined-up approach to flood prevention and our case for -
Trend or blip?
The risk of flooding is increasing due to a combination of:
The floods that swept through England in the Autumn of 2000 resulted in insurance claims, including associated storm damage, totalling over £750 million £1.3 billion (£860m domestic property and £440m for commercial property). (ABI November 2001) - yet tThis was not an isolated event. Flooding during Easter 1998 resulted in five deaths and caused £150 million of insured property damage - this figure is far greater when including property damage that was not insured. All of the available evidence points to flooding increasing in frequency over the coming years.
2000 was the worst year for weather-related insurance claims since 1990.
Escaping serious flooding this winter would not mean an end to increasingly regular flooding. The prolonged bad weather in 2000 in the UK has led to speculation that these weather events appear to be becoming more frequent.
The Environment Agency, which is responsible for flood warning in England and Wales, recently stated that flooding is now twice as frequent as 100 years ago and predicts that there will be a ten-fold increase in flood risk over the next century.
Globally, the picture is much the same. Even if recent weather events just reflect natural variability, there is still cause for concern. Of the 40 most costly global insurance losses since 1970, 26 of these were in the last ten years and 16 in the last 5 years. (Swiss Re 2000)
The impact of climate change
The likelihood and distribution of extreme weather events has rapidly become the focus for much heated climate change debate. Figures show that -
1998 was the warmest year on record (since 1860s) globally;
1999 was the warmest year on record in the UK since 1659 when central England temperature recordings began;
the 1990s were the hottest decade in Europe since records began;
during the 1990s rainfall over northern Europe increased by between 10 and 40% (since records began).
One of the leading centres for research into climate change is the United Kingdom Climate Impact Programme (UKCIP). This centre uses Regional Climate Models, which predict climate change under a range of greenhouse gas emission scenarios. The UKCIP models speculate that we could see an increase in temperature of around 3 degrees, an increase in precipitation of 20% and a rise in sea levels of 67cm by 2080 (based on average UK levels recorded between 1960 and 1990).
Increased rainfall, increased flooding
The impact of these changes will be grossly distorted weather systems, which will result in erratic and increasingly intense weather conditions producing high winds and storms with extreme downpours.
We are likely to inhabit an environment where floods such as those experienced recently will become commonplace in a relatively short period of time.
Current flood data supplied by the Environment Agency does not take into account the potential effects of climate change. If the climate change scenarios are to be taken seriously the shape of these flood maps needs to change.
Flood defences - preparing for the inevitable
The current average annual loss to UK plc as a result of flooding is estimated to be £800m. The existing annual spend on maintaining or improving flood defences is £200m. At this level, average annual damages will increase by £20m per annum until they reach about £1.6 billion. However, the annual damages could be contained at the present level by increasing the annual spend to £400m. A further increase in spend to £650m could reduce average annual damages to £200m. (MAFF 2000)
The overall spend on flood defence work is about £400m. This includes administration and flood warning systems as well as work on flood defences. It is being increased by £60m over a 4 year period. Following the severe floods in 2000 the Government announced additional expenditure of £57.6m over the next few years - partly to meet emergency costs. (National Audit Report March, 2001)
It is clear that the increased expenditure already announced falls well short of that required to even contain existing losses. Further expenditure beyond that mentioned above, is also required to build new defences to overcome the legacy of previous inadequate planning decisions.
Insurers and policyholders are making a significant and increasing contribution towards this shortfall, representing an unsustainable position.
These figures would be dramatically worse if the full predicted impact of climate change was taken into account. A report presented at the DEFRA Conference in 2001 suggests that the average annual damage to property as a result of flooding will more than double under existing climate change predictions (increase 250% by 2075).
In February 2002, DEFRA published the report, 'Flood and Coastal Defence Funding Review' together with a consultation document seeking views on the steering group's recommendations. Norwich Union welcomes the opportunity to participate in this process through the Association of British Insurers. However, we believe that immediate action is required to address not only the sources of funding and organisation but more critically a significant increase in investment for flood defences.
We expect the consultation process to include a review of:
The Government has plans to allow the construction of some 3 million new homes by 2016. Government policy is to encourage urban regeneration and development on brownfield sites. Much of this land is industrial and tends to be close to rivers and is therefore vulnerable to flooding. (Guy Carpenter 2000)
Implementation of this policy would have increased insured losses in past floods and the continued development on flood plains can only exacerbate the problem.
Norwich Union welcomes the principles behind the Government's recent planning guidance (PPG25) for development on flood plains, particularly the obligation it places on developers to fund and maintain robust flood defences for new developments in such areas. However, we feel that there are three areas where the guidelines do not go far enough:
We feel that the minimum standard of protection required for flood insurance to be regarded as affordable should be 1 in 200 years rather than the proposed 1 in 100 year standard.
It is hard to understand why the Flood Direction, requiring referral to the Secretary of State where Environment Agency advice is ignored, should not be put in place as of now.
Guidelines advise developers and Authorities to consult with insurers on new developments. We feel that a more formal arrangement should be put in place to ensure that this consultation takes place.
Norwich Union welcomes the proposals to streamline the planning system announced in the Green Paper - 'Planning: Delivering a Fundamental Change'. The paper provides for all planning policy guidelines (PPG) to be reviewed in order to separate policy guidance from practical information and advice.
Norwich Union is calling for PPG 25 to be made statutory. The implementation of a national policy on flood risk, rather than simply guidelines, would help ensure that adequate consultation processes are adhered to as part of the proposed new local planning frameworks.
Guidance is not enough
Norwich Union is aware of cases where planning permission was granted for developments on the understanding that flood defences were built, yet these defences have not appeared.
Not only are residents and their property at risk but we believe that the insurance industry is now subsidising sub-standard developments and that this must end.
Underwriting policy must, of course, remain a commercial decision. The provision of robust flood defences remains an obligation for Government.
The case for defending existing properties
Many existing properties have been flooded 2, 3 or even more times during the last 3 years.
Urgent consideration is being given to the construction of flood defences to protect these properties but the existing DEFRA cost appraisal guidance means that many defences are unlikely to be built. Flood insurance premiums could become unaffordable in these areas.
Current cost benefit guidance values assets at considerably less than the economic cost to property owners of a flood. Assets are valued on an indemnity basis (second-hand value) whereas insurance companies replace customers' belongings with new goods. In addition, the cost benefit analysis does not reflect the full costs of flooding. For example, no allowance is made for associated social or health costs.
Also, even based on this low assessment of benefits, flood prevention schemes do not currently get central funding unless the benefit to cost ratio exceeds 3 to 1, with the stated intention being that this ratio should be increased to 5 to 1.
There is a need for an urgent review of these guidelines.
Flood insurance was introduced in the UK in the 1960s following the Government's commitment to provide flood defences in areas at high risk from coastal or river flooding. This arrangement is unusual: in many European countries and North America flood insurance is not available as a standard feature of household policies.
However, some areas in the UK are becoming uninsurable following the deterioration of flood defences coupled with an increasing risk of flooding.
In December 2001, the Environment Agency admitted there are about 100 communities which it is no longer cost-effective to protect against floods. Speaking on Radio 4's Farming Today programme, the chairman Sir John Harman said that homeowners and businesses in those areas will increasingly have to seek individual solutions for flood protection.
To help residents and business owners, Norwich Union has launched a national campaign, 'Home & Dry' to encourage communities to establish local flood action to help protect themselves against preventable flooding.
Norwich Union, working through the Association of British Insurers (ABI), is continuing to provide current cover against flooding for existing households and small businesses, other than in exceptional circumstances, until December 2002.
Within the period of this agreement, the insurance industry expects the Government to put in place robust plans to ensure protection on flood plains and that improvements to flood defences in the most vulnerable areas exposed to flooding are made as a priority.
There is only a short window of opportunity to prevent some people losing their cover.
Norwich Union aims to provide a comprehensive, first class service to its policy holders. Although insurance can never fully compensate for the emotional trauma that flooding causes, a swift and professional response can at least alleviate immediate financial concerns.
Mapping
Accurate mapping data is crucial to better understanding and awareness of flood risk throughout the UK. The current data used is not sufficiently reliable to reach a satisfactory, informed decision.
Norwich Union has commissioned the production of detailed relief maps of the UK, indicating land heights above sea level. This data will enable us to develop a flood model for incorporation into our new pricing platform for household and commercial property customers. This unique information will ensure that we can price even more accurately for each individual case.
In future properties will need to be assessed individually to ensure that we have an opportunity to clarify what defences are in place, what defences are planned and how often the property has been affected by flooding.
The Government must deliver quickly improvements in levels of flood defence.
Action is needed now in the following areas:
Flood defences
The Government must deliver quickly improvements in levels of flood defence.
Action is needed now in the following areas:
Planning controls
Planning guidelines for new building should adopt a minimum defence against a 1 in 200 year flood risk;
An end to the sandbag culture and a new flood strategy
The sandbag culture of inadequate defences and poor planning must end. The insurance industry cannot continue to pick up the bill for the continuing failure to plan effectively for the increasing likelihood of flooding. The growing regularity of flooding and a failure to invest in robust flood defences is likely to result in areas wherehousing property is potentially uninsurable.