Flood defence demands `unrealistic', says mandarin

The insurance industry's demands for a dramatic increase in flood defence spending will not be met by the Chancellor in his next spending round, according to a senior government official.

Department for Environment, Food and Rural Affairs (Defra) director general for rural affairs Anna Walker said the Association of British Insurers' (ABI) demand for the government to increase flood defence spending by £145m was "unrealistic".

She said a number of measures could be taken to improve the situation for insurers such as influencing planners, but that the industry's demand for a large cash injection would not be met by July's comprehensive spending review.

Nick Pierson, Norwich Union's head of household products, said the remark was not unexpected. But

he added: "The figure we are quoting is more than realistic."

Pierson, who is spearheading the industry's campaign to reduce catastrophic flooding losses alongside the ABI, said increased spending was one of three issues the industry was concerned to see action on.

He said that if flooding problems were prioritised in the right way, the cash available could be spent more effectively.

Pierson said government proposals for prioritisation had three flaws. He explained that the proposals, which were put out to consultation earlier this year, did not take into account social costs of flooding - for instance the amount of time taken off work to handle a flooded home.

Pierson said the government's proposed cost benefit analysis was inappropriate. He explained that the government proposed a benefit to cost ratio of three to one, where a normal ratio would be one to one.

The government's attitude to replacement costs was also wrong, said Pierson. "Government evaluates the cost of a flood on an indemnity basis rather than an old-for new. It does not reflect the true cost to insurers who replace old-for-new."

Replies to the government consultation document are due back by mid-May.

  • The Flood Protection Association has been launched to provide accreditation for flood protection products such as floorboards, sealants and airbrick covers. The ABI, DTI, Defra and Environment Agency have welcomed the move.