The government must prove it is serious about flood defence by February - or else... Amanda Swinburn reports.
Last week, there were angry calls from insurers for the government to speed up flood defence spending.
At a risk seminar held by the Benfield Greig Hazard Research Centre to discuss the impact of climatic change on insurers, delegates were told no provisions have been made for after December 2002 - when the temporary deal between the industry and the government ends.
After the floods of October 2000, which saw the wettest autumn in more than 270 years, the Association of British Insurers (ABI) agreed insurers would continue to cover homes in flood-prone areas in exchange for increased government spending to reduce future risks.
But insurers say they require proof of the government's intentions by February. If the answers are not satisfactory, thousands of homeowners could be left dangerously uninsured.
According to the Department for Environment, Food and Rural Affairs (Defra), 10% of the population of England and Wales lives in flood hazard areas and £220bn-worth of property is at risk.
But ABI flood risk adviser Professor David Crichton told the seminar that while the UK government currently invests 0.03% of GNP on flood defences, this still results in average annual flood damage of £10m to £15m. The figure, he said, should reach at least 0.05% if flood risk is to be contained.
Paying the price
Two weeks ago Lord Hunt of the Wirral spoke on behalf of the ABI in the House of Lords. He called for at least £145m of extra spending on flood defences and new planning controls to limit "inappropriate development in areas with a high risk of flooding".
The main problem is the government does not agree with insurers on how spending should be set. ABI property and household deputy manager Gemma Hawes says at current levels, government spending does not accurately reflect the "hidden costs" of flooding.
"At the moment, spending does not reflect the cost to people's health, the cost of rehousing people and the cost of people being unable to get to school or their workplace," she says.
The ABI says if insurers cannot make a satisfactory agreement with the government over flooding, the customer will suffer further.
Weather claims continue to grow as a percentage of total household claims and insurers are concerned their losses will keep rising unless something is done.
Hawes says: "There might be difficulties if communities reject flood management schemes, if there is new building on the floodplain without adequate defences or if flooding is inevitable with no prospect of flood management in a reasonable timescale.
"Insurers are here to cover risk, not certainty."
But the ABI maintains flood defences are not the only measures that need to be implemented to lower flood risk. Other matters need to be addressed, such as agricultural practices, maintenance of sewer systems and sustainable drainage methods.
At present, insurers are aiming to continue covering almost all properties, by "bundling" flood cover together with other household covers and perhaps charging a higher premium in flood-prone areas.
But if insurers' criteria are not met, the government may have to look at covering the cost itself.
In fact, the UK is the only country in western Europe, besides Portugal, which does not offer some kind of state compensation scheme for flood victims.
State assistance
In the US, Spain and Switzerland, there are government insurance schemes in which the government is the primary insurer.
Italy, Spain, Denmark, Belgium, Norway, France and the Netherlands all offer some form of compensation for flood victims in government-recognised disasters.
Shirin Elahi from the centre for environmental strategy at the University of Surrey points out state insurance schemes have a higher level of penetration than private schemes.
The UK government says it is "difficult and divisive" to compensate for insurable risks because, while anyone can benefit, not everyone would pay into a government scheme.
Crichton believes the model the UK and Wales should be following is already in place - in Scotland.
His research shows lobbying for measures against flooding has proved to be very successful.
There are now 16 flood appraisal groups, with 22 local authorities involved out of 32, offering cover for 84% of the Scottish population.
He says: "Pressure to allow building on floodplains often relies on the assumption that flood insurance will be readily available, thus allowing purchasers to obtain loans to buy the property.
"In the future, this may no longer be the case."
