Insurer trade body notes £500m gap in funding

Isle of Wight Centre for the Coastal Environment - coastal defences

The ABI has urged the government to increase funding for flood defences after an announcement this morning clarifying how the £2.3bn earmarked for flood defences would be allocated.

The government first unveiled the £2.3bn spending on flood defences in last year’s Spending Review, but this morning gave a breakdown of some of the projects that will benefit.

The government said the £2.3bn spending would improve protection for more than 300,000 homes and prevent more than £30bn of economic damage.

ABI deputy director general Huw Evans said that insurers welcomed the spending following the cuts initially made by the coalition government in 2010.

But he added: “To keep pace with what is needed to protect our flood-risk communities, the Government’s own climate change advisers have identified a £500 million shortfall between current spending and what is necessary so it is vital that the next spending review continues to increase funding for flood defences and maintenance if we are to be prepared for the future.”

Aviva chief underwriting officer Simon Warsop added that the flood defence spending “can’t come soon enough for the people whose homes are at high risk of flooding”.

But he also bemoaned the insurance industry’s limited ability to contribute to flood defence funding.

He said: “The challenge is how to pay for additional flood defences when government finances are so tight.

“The insurance industry is a major investor in infrastructure but there is currently no mechanism for insurers to invest in flood defences. It would be possible if a way could be found for people who save money with us to receive a suitable return on their investment.”