The participants in our flooding roundtable had strong opinions on how flood risk should be managed
Dr Swenja Surminski, senior research fellow, the Centre for Climate Change Economics and Policy, London School of Economics
The UK should look at what other countries are doing to combat flood risk and avoid repeating the same mistakes, Dr Swenja Surminski argued. “A lot of the issues here are similar to those experienced in Florida, where they set up schemes for homeowners to create resilience,” she said. However, she pointed out that this plan had backfired, as insurers exited the market. She raised concerns about the European Commission’s ambitions for a one-size-fits-all approach to flood risk, as insurance systems differed from country to country.
UK insurers faced difficulties in dealing with national flood risk, Dr Surminski said, because so many crucial decisions were made by local authorities who failed to communicate developments to the private sector. “There is a real issue with decentralising decision-making,” she said. “Insurers need to have information about defences.”
Dr Surminski also pointed to continuing difficulties surrounding data-sharing between insurers, government and local authorities remained owing to the huge fear that sharing information on flood risk would lead to increased premiums.
Bill Gloyn, JLT European real estate partner, and chair of the British Property Federation’s insurance committee
JLT’s Bill Gloyn compared the risk posed by flooding to the danger of terrorism. “Flood is a security issue for society as a whole, for the country as a whole,” he said, adding that a similar pooled approach should be adopted to fight flood risk. “Possibly this concept of rating flood insurance according to the risk should be rethought,” he said. “There ought to be a standard rate for the country. As with the pool for terrorism, there should be a standard rate for flood insurance for the whole country – everybody contributes towards preventing what is a risk to society.”
He warned that the failure to achieve widespread cover for flood would create far-reaching social problems. “Without insurance there is a risk of the breakdown of social fabric. Buildings won’t be occupied, because people can’t get insurance or funding to carry on their businesses. I don’t think the impact of that is fully understood, either by the insurance industry or the government.”
He added that while there was a gap in the research on surface water flooding, the government and local authorities remained reluctant to accept data from insurers. “My suspicion is they will think it’s a vested interest.”
Matthew Cullen, ABI policy adviser, on flooding
The statement of principles – the protocol by which insurers continue to provide cover in high-risk areas – is due to expire in June 2013. ABI policy adviser on flooding Matthew Cullen explained that various working groups had been set up to develop a long-term sustainable solution that will allow widely available flood insurance to continue after 2013.
He said that ABI working groups had looked at the merits of different systems. “Those options range from having a free market, right up to the French fully nationalised pooling system,” he explained.
In addition, the association had done some work in collaboration with economic consultants Oxera looking at potential models for flood risk. “I think the idea of having a pooling arrangement for high-risk properties is definitely an idea that’s being looked at. I think it’s definitely an option.”
Cullen argued against the suggestion that everybody should pay the same rate for flood insurance. “That would discourage investment in flood risk management, at both a government and individual level, because it wouldn’t impact on their insurance premiums.”
On the right track
“If the momentum continues from the government and the insurance industry, we are actually on the right track to being able to provide the solutions that will give a better customer experience in the long run.” Graham White, Tokio Marine Europe
It’s good to talk
“There are a lot of challenges around the provision of long-term flood insurance for customers – how we fund it, who funds it, and how we lobby the government and work with it to ensure flood defences for the future. Getting other people around the table to put their ideas forward and debate the issues is healthy.” Ian Davies, RBS Insurance
The power of influence
“I really think we have a chance in the next 12 to 18 months to influence the government strategically, which we haven’t had for a number of years, and I think this could be the last chance to actually do so.” Douglas Barnett, AXA
“We need the perception of this risk to increase significantly, so we probably need to talk to the people in a different way.” Gero Michel, Willis Analytics