Changes to Flood Re’s scheme include an altering of its levy 

The insurance industry has commended the Department for Environment, Food and Rural Affair’s (DEFRA) record investment of £5.2bn as it sets out long-term plans to mitigate flood risks against the backdrop of climate change.

The ABI’s director of general insurance policy, James Dalton, said: “With Flood Re due to end in 2039, it’s really important that we’re all working towards the same goal of reducing the damage caused by flooding.”

The investment also included changes to the Flood Re scheme, such as an amendment to the annual levy that is raised from insurers and the maximum it is liable to pay out each financial year. The reinsurer believes this is a necessary step towards building flood resilience.

The plan sets out to create 2,000 new flood and coastal defences to better protect 336,000 properties in England by 2027. It also intends to help households and businesses get back on their feet more quickly after flooding. There will also be lower premiums for those who “build back better”.

It follows Flood Re warning the industry that its exit which is earmarked for 2039 is currently being threatened by climate change after 2019/2020 saw £160m in flood losses.

Further Reform

Dalton added: “We also welcome the review of whether further reform is required of the policy for building in areas at risk of flooding and for Local Authorities to seek advice when considering development proposals.”

Biba has called for some changes to the Flood Re scheme, however, saying: “We will ensure we do all we can to ensure these changes are effected.”

Biba has proposed a number of changes to the Flood Re scheme to improve its efficiency and effectiveness are in line with those set out in Flood Re’s Quinquennial Review, these include:

  • Amendments to Flood Re’s annual levy and the maximum it can pay out each financial year
  • Allowing Flood Re to offer discounted premiums to homes that have fitted property flood resilience (PFR) measures, such as airbrick covers or non-return valves.
  • Allowing the payment of claims to include an additional amount to repair homes in a more flood resilient way – what Biba has called Build Back Better;
  • Exploring whether Flood Re can do more to accelerate the uptake of property flood resilience such as contributing part of the scheme’s currently available funding.
  • Working with Flood Re and the insurance industry to explore whether it would be beneficial for insurers to share more information with customers about their flood risk, in order to encourage all parties to take responsibility for uptake of resilience measures.

Biba’s 2020 manifesto called for the promotion of new standards in flood resilience measures that would help insurers to build back better, and it has also long campaigned for better access to Flood Re.

Meanwhile Zurich Municipal released a white paper ‘The Climate Change Challenge’ to spark a dialogue and discuss strategies to help organisations manage the effects of climate change.

The insurer also drew attention to the cost of hurricanes, wildfires and floods in 2019 costing the world $150bn.

Zurich Municipal managing director Andrew Jepp said: “We are facing up to the immediate challenges of a global emergency. The climate change emergency. While the Covid-19 pandemic is urgent and immersive, it is not the only global emergency public service organisations are acting on now.

“Over the past year many aspects have shifted rapidly: particularly policy-making and public sentiment. All organisations are now considering the climate impact of decisions and are developing holistic strategies to build resilience.

“Organisational culture should embed de-carbonising services, building resilience and managing physical risks. We have to respond well to extreme events through consistent, effective recovery plans.”

Martyn Green, home, motor and pet portfolio optimisation director at RSA, said that insurers have a role to play in supporting customers to build back better. For example, offering advice on improving flood resilience and the option to upgrade to flood-proof items when repairing flood damage.

”The proposed changes to Flood Re should act to encourage this, helping people to build stronger flood defences in their own homes and ultimately better protecting themselves from the damage and devastation floods can cause,” he said.

Green added that it is positive news that should not only improve flood defences, but also encourage and incentivise individuals to improve their own flood resilience, better protecting their homes from the damage flooding can cause.

Actionable flood warnings

However, Previsico’s chief operating officer, Avi Baruch, told Insurance Times that although it is important to see others investing in flood defences and preparing action plans that often what is missing are actionable flood warnings.

Previsico provides flood forecasting to the cabinet office, insurers and businesses with actionable property level forecasts so that plans can implemented in time.

Baruch added: “There is clear evidence that most flood impacts are avoidable so it’s essential that more properties are better prepared and those who implement resilience measures are rewarded by their insurer.

“This funding will definitely help; however, surface water flooding is becoming more prevalent with climate change and this is putting more homes and businesses at risk than any other form of flooding.

“A lack of accurate, timely forecasts also remains an issue, one that we are addressing, which results in slower emergency response times and unnecessary, costly damage being caused to the property and contents.”

Read more…HNW Focus: HNW capacity enjoys resurgence despite economic covid constraints 

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