Memorandum submitted by the Association
of British Insurers
SUMMARY
1. The Environment Agency, and the Government
more widely, has made good progress in the last few years in improving
the effectiveness of flood management. Many of the factors enabling
insurers to remain on cover for as many customers as possible
are now being addressed. Key achievements include:
— Remaining on track to reduce flood
risk for 80,000 households for the period April 2003-06 and contributing
to the new target to improve the standard of protection for 100,000
households for the period April 2005-08.
— Streamlining flood defence committee
structures and moving towards national procedures for the allocation
of funding, removing the postcode lottery.
— Developing improved and accessible
flood risk data for use by the public and by planners, insurers
and lenders, with plans for further progress.
— Successful trialling of innovative,
temporary and demountable flood defences to serve communities
where conventional defences are not feasible.
— Transfer to the Agency of approximately
40% of ordinary watercourses representing greatest risk, with
plans for completion by April 2006.
— Recognition that the Agency should
take a strategic overview of all types of flooding, with important
pilots on integrating urban drainage and sewage issues within
catchment planning, and grant aid for householder action.
— Action to improve and extend flood
warning systems, including the requirement to opt out.
2. Building on these successes, ABI believes
that the Agency should now:
— Ensure that the flood defence database
is complete and up-to-date, and medium term plans for investment
are clear and accessible. (Urgent).
— Ensure procedures deliver maximum
efficiency and effectiveness and clarify how savings will be used
to cover inflationary costs over the 2004 spending review period.
(Urgent).
— Ensure that its skills base is deployed
to greatest effect, especially engineering staff, and that future
needs are addressed.
— Work to achieve more effective action
by the emergency services and by flood warning recipients once
a flood is expected, to ensure life safety and that flood damages,
including threats to the wider community, are minimised.
3. In addition, Government should enable
the Agency to be more effective by:
— Strengthening the Agency's role in
advising on planning decisions in flood risk areas in order to
avoid increased flood risk through inappropriate development.
— Increasing investment levels by at
least £30 million year on year in real terms, so that national
flood risk is reduced despite growing risks from climate change
and aging assets, together with improved measures of the overall
effectiveness of spending.
DETAILED COMMENTARY
ON THE
WORK OF
THE ENVIRONMENT
AGENCY IN
MANAGING FLOOD
RISK
4. The Association of British Insurers (ABI)
is the trade association for insurance companies operating in
the UK. It represents over 400 members who, between them, account
for over 94% of the general insurance business of UK insurance
companies.
5. The insurance industry has a long history
of close working with the Environment Agency and its predecessor,
the National Rivers Authority. Over a decade ago the NRA and ABI
collaborated in mapping the state of coastal defences and assessing
the risk of failure or overtopping together with the resulting
areas affected by coastal flooding. The events of Autumn 2000,
which led to insurance claims exceeding £1billion, brought
about a further strengthening of these ties as insurers sought
action from Government that would enable insurance to continue
to operate cost effectively in all areas of the UK, avoiding withdrawal
with the resultant social and economic costs.
6. The ABI identified seven key areas for
action, all of which impinge to some degree on the Environment
Agency and its operations in England and Wales. These are:
— Greater and sustained investment
in flood defences.
— Administrative streamlining.
— Improved land use planning.
— Better flood risk communication.
— Improved flood warning and emergency
planning.
— Integrated land drainage planning,
particularly in urban areas.
— Addressing chronic sewage flooding.
7. To date ABI members, who provide 95%
of household insurance and 90% of commercial insurance in the
UK, have been able to stay on cover for nearly all customers in
most locations. Premiums and conditions will reflect the risk.
8. This paper sets out the ABI's views on
the extent to which the Agency has been successful in addressing
each of these critical concerns and identifies further action
needed to ensure insurance remains sustainable in areas with high
flood risk.
FLOOD DEFENCE
INVESTMENT
9. Insurers were concerned that much of
the damage sustained in the floods of 2000 was due to chronic
under-investment in the defence system over many years. The ABI
therefore welcomed the step change in investment announced in
the 2002 spending review, enabling the Agency to put in place
a more realistic programme to deliver better flood protection
in England and, through consequential funding allocations to the
Devolved Administrations, in Wales.
10. Over the period covered by the 2002
spending review, the Government's commitments on investment have
been exceeded to date and Defra advises that it expects that the
cumulative target at the end of the period will be exceeded. The
ABI looks to the Agency to ensure that this investment is used
to greatest effect through improved capital planning and rigorous
assessment processes in allocating funding between new investment
and maintenance programmes. We expect the Agency's reports to
Parliament to enable a thorough scrutiny of the effectiveness
of these processes.
11. Insurers are concerned that holding
flood management expenditure at £564 million per annum in
real terms will not, in the long term, be sufficient to meet the
increased challenges that climate change and aging flood (especially
coastal) defences bring. The ABI welcomes the Stern Review into
the economics of climate change, announced by the Government on
13 October 2005. We expect the comprehensive spending review in
2007 to take account of the growing body of evidence on the significantly
increased flood risks in future, estimated by the Foresight study
on "Future Flooding" (2004) to at least double to £2
billion per annum, and possibly rise twenty-fold. This study calculated
the need for an additional £30 million year on year (that
is, cumulative) increases in investment to deal with climate related
risks alone. The ABI is investigating the full future funding
needs to contribute further to the evidence base, but consider
it essential that, as a starting point, Foresight's findings should
be reflected in Defra and the Agency's settlements with effect
from 2007-08, in real terms. Without this rising investment we
do not see how the Agency can deliver its remit in future.
Table 1
FLOOD MANAGEMENT EXPENDITURE (£ MILLION)
| 2003-04 | 2004-05
| 2005-06 | 2006-07
| 2007-08 | |
| Total Provision | 419 | 478
| 570a | 570a | 570a
| |
| Total Spent | 432 | 479
| — | — | —
| |
| Made up of: | |
| | | |
|
| Defra "traditional" support for projects
| 125 | 133 | 169b
| 169b | 169 | b
|
| Block grant to Environment Agency | 0
| 271 | 330 | 330
| 330 | |
| Local authorities and internal drainage boards
| 295c | 65c | 63
| 63 | 63 | |
| Defra other expenditure | 10d
| 10d | 8d | 8d
| 8d | |
a Includes some £6 million not included in the original SR2002 allocation.
b Includes £15 million for "traditional" support and £5 million for EA block grant from Government to make good previously-expected income from new funding streams.
c In addition local authorities used council tax to pay levies to Environment Agency that exceed ODPM support (an additional £21.2 million in 2003-04 and £14.4 million in 2004-05).
d Including contribution to Ministry of Defence for Storm Tide Forecasting Service.
| | | |
| | |
12. The ABI welcomed the Agency's innovative trials of
both demountable and temporary flood defences in the Severn valley,
enabling protection to be offered to communities where conventional
engineered solutions are not feasible. In particular, insurers
consider these measures invaluable in providing consistent standards
of defence within communities where individual flood cells would
otherwise receive markedly differing protection due to variations
in cost:benefit returns. The ABI strongly supports the risk-based
approach to decision making adopted by Defra and the Agency but
recognises that communities, particularly small market towns,
need coherent strategies if they are to remain vibrant and sustain
local economic development.
13. Future developments should include more widespread
adoption of these approaches, together with grant aiding of individual
property protection measures (due to be trialled in 2006), so
that small communities, and other properties in high risk areas
difficult to defend, can also benefit from taxpayer investment
in flood management. In taking these policies forward there needs
to be a clear vision of the respective roles of the Agency and
of local authorities in delivering and deploying these risk management
measures. We would welcome a public debate, engaging all affected
stakeholders, on these issues.
EFFICIENCY SAVINGS
14. In the 2004 spending review the Government gave commitments
to sustain the level of investment at 2005-06 levels in real terms
by recycling Environment Agency efficiency savings. These savings
were to be used to cover inflationary increases in expected staff
and construction costs over the period. In its latest Corporate
Plan (2005-08), the Agency has set out an efficiency programme
to deliver £15 million in savings each year through reducing
the cost of decision-making, overheads and through better procurement
methods. The Agency now needs to clarify how these efficiency
savings will be monitored and used.
HOUSES PROTECTED
15. Defra predicts that the investment programme will
deliver additional protection to at least 80,000 properties in
England by March 2006, in line with its commitments (Table 2).
Insurers are pleased that the Agency is currently on track to
make a substantial contribution to achieving this target.
Table 2
PROPERTIES BENEFITING FROM IMPROVED FLOOD PROTECTION
Year | Households benefiting from improved
flood protection
| Environment Agency contribution |
2003-04 | 20,000
| 17,000 |
| 2004-05 | 33,800 | 30,000
|
| 2005-06 (estimate) | 40,000
| 30,000 |
TOTAL | 93,800 |
77,000 |
| | |
16. Going forward, the Government plans to improve the
standard of protection for at least 100,000 households during
the period covered by the 2004 spending review. As the chief operating
authority under the new funding arrangements, the Agency will
continue to have a crucial role in delivering protection to 33,000
houses within this target. Insurers believe that some of the more
innovative approaches described above will need to be more widely
adopted if further progress is to be sustained in delivering greater
protection to largely unprotected properties in future.
17. Insurers would like to see careful monitoring of
the movement of properties between different risk bands (low,
moderate, and significant) and the development of an appropriate
target to ensure the correct balance between providing new defences
for essentially undefended properties and enhancing defence standards
for areas of high aggregation where the number of people, properties
and extent of the local, regional or national economy affected
by a flood would be substantial. This would strengthen the new
output and performance measures for flood management, and associated
targets, which will achieve the greater transparency and accountability
the ABI sought in pressing for a strong role for the Agency in
leading flood management operations.
ADMINISTRATIVE STREAMLINING
18. Funding problems prior to the 2002 spending review
were exacerbated by complex funding and decision mechanisms, so
that scarce resources could not be used to greatest effect. There
was little transparency or accountability. Insurers welcomed the
move to allocate the majority of flood management expenditure
directly to the Agency by way of block grant, reducing bureaucracy
and ensuring greater accountability.
19. The establishment of single tier regional flood defence
committees from 1 April 2005 has reduced bureaucracy, enabling
efficiency savings. Similar rationalisation of processes, introducing
national (rather than regional) procedures and effective management
information systems to enable better scrutiny, improving accountability
and allowing appraisal of flood management strategies, should
be pursued further. Once the Agency has established these improved
systems, we believe Defra should devolve all decisions on flood
schemes to the Agency, limiting Defra's oversight to audit functions.
20. Likewise the Agency, which on flood management issues
is an executive agency of government, should leave policymaking
to Defra and concentrate on policy delivery. The Agency's engineering
expertise should be focused on delivering benefits on the ground.
We understand that the Agency has been working closely with the
Institute of Civil Engineers to ensure that additional trained
personnel are available as the flood investment programme expands.
More such resource will be needed as the challenges of climate
change and aging assets are tackled, necessitating increased investment
programmes in future. The ABI considers that historic swings in
funding have undermined the development of engineering capacity
in the UK, both public and private sector, and that sustained
investment profiles, together with adequate national training
strategies, are needed to avoid similar problems in the future.
21. The Agency's regional management tier should be concerned
wholly with delivery, not strategy, and resources should be deployed
according to a central strategy setting out current flood management
priorities rather than perpetuating historic allocations through
bottom up bids.
TRANSFER OF
CRITICAL WATERCOURSES
FROM LOCAL
AUTHORITIES
22. Work on transferring responsibility for those watercourses
representing the greatest flood risk—the so-called critical
ordinary watercourses (COWs)—to the Agency is making slower
progress than insurers had hoped (Table 3). We understand this
is in part due to the need to negotiate the transfer of associated
resources on an individual basis. Insurers are concerned that,
since the inadequate management of flood risk seen on some of
these watercourses in the past was often due to a lack of resources
being devoted to the issue, this may have been an unnecessary
distraction. We look forward to completion of the process by April
2006.
23. It is important that these flood sources, which often
appear deceptively benign, are brought within the catchment management
processes that only the Agency can co-ordinate. This should also
enable better mapping and communication of local flood risks and
avoid confusion over insurability, enabling local housing markets
to function properly.
Table 3
PROGRESS ON TRANSFER OF COWs
Phase | Number of authorities1
| Number of COW lengths |
Achieved by 31 October 2004 |
55 | 225 |
| Achieved by 1 April 2005 | 97
| 464 |
| To be achieved by 1 April 2006 | 137
| 1,062 |
1 Includes all operating authorities, not just local authorities.
| | |
DEVELOPMENT CONTROL
AND PLANNING
24. The introduction of Planning Policy Guidance 25 on
flood risk and development in 2001 by the Office of the Deputy
Prime Minister (then Department of the Environment, Transport
and the Regions) was a welcome step forward, mirroring stronger
planning guidance already in place in Scotland (and since enhanced
further).
25. After an initial improvement in responding to Agency
objections (baseline 2001-02), performance now appears to be plateauing.
In the last three years, local authorities approved around one
fifth (or a total of around 1,000 cases) of all planning applications
despite the Agency sustaining its objection (Table 4). Since planning
authorities are not obliged currently to seek the Agency's advice,
nor report back whether this advice has been heeded, the actual
situation may be much worse. The Agency estimates it may be consulted
on less than 60% of applications at risk of flooding. Not all
planning decisions where the Agency has objected are reported
back, although this proportion is said to have improved from around
40% in 2002-03.
Table 4
RESPONSES TO ENVIRONMENT AGENCY ADVICE ON PLANNING APPLICATIONS
ON FLOOD RISK GROUNDS
| 2001-02
| 2002-03 | 2003-04
|
Number of planning applications requiring consideration by EA on flood risk grounds
| 24,138 | 20,452 | 22,067
|
| Total EA objections made on flood risk grounds
| 2,500 | 4,523 | 5,077
|
| Sustained objections on flood risk grounds (where outcome is known)
| 758 | 1,047 | 1,437
|
| Proportion of applications going ahead against sustained objection
| 37% | 21% | 23%
|
| Major developments going ahead contrary to EA advice
| 50 | 22 | 21
|
| |
| |
26. Insurers would like to see PPG25 strengthened by:
— Making the Environment Agency a statutory consultee.
— Providing for the Secretary of State to call in
applications that a local authority approves despite a sustained
objection from the Agency.
— Clarifying the sequential test, using land at
lowest flood risk first.
— Strengthening the requirement to include consideration
of climate change impacts.
27. However the Agency will need to ensure that it can
respond in a timely manner to the increased demand for advice
that these measures would generate. The total number of planning
applications requiring consideration by the Environment Agency
on flood risk grounds has fallen significantly recently due to
the adoption of national "standing advice", enabling
local authorities to respond directly to planning applications
for "lower risk" developments without case by case consultations.
The Agency focuses on higher risk applications such as major developments.
Insurers are concerned that this approach may lead to cumulative
undermining of policy through inappropriate decisions on numerous
small developments. Accordingly we support this risk-based approach
provided:
— High quality strategic flood risk assessments
are in place;
— Strategic planning frameworks steer designated
development zones, sufficient to accommodate the major part of
local and regional housing targets, away from areas identified
in these assessments as being at flood risk; and
— National monitoring and reporting of the results
of these "fast-tracked" decisions is in place, to ensure
that the Agency's standing advice is being complied with.
28. In its initial response to the "Making Space
For Water" consultation in March 2005, the Government announced
its plans to review existing Planning Policy Guidance for flood
risk areas (PPG25) and indicated that it was minded to give the
Agency statutory consultee status. We are keen to see this and
the other measures set out above put in place as soon as possible.
FLOOD RISK
DATA
29. The Agency has made good progress in communicating
flood risk through delivery of its flood mapping strategy.
30. Better catchment-wide modelling of flood risk, the
inclusion of the effects of flood defence measures and other features
(such as railway embankments) and upgrading of the website resource
available to the public has ensured improved, more relevant flood
risk information is accessible to all. Likewise insurers welcome
the provision of the extreme flood outline to planning authorities,
showing the extent of the floodplain facing 0.1% probability of
flooding in current climatic conditions. We note that the planning
guidance issued by the National Assembly for Wales requires planners
to take account of future flood risk levels, incorporating climate
change effects, and urge the Agency to provide similar information
to planning authorities in England.
31. Insurers and lenders were provided with outputs from
the National Flood Risk Assessment (NaFRA) modelling tool in October
2004. The quality of some information was questionable and no
flood probability data was available for around 400,000 properties
in flood risk areas. Improved data were provided in February 2005,
but 260,000 properties still had no assigned flood probability.
We hope that further improvements in modelling will enable these
shortcomings to be addressed in the very near future, and that
these improvements will also be reflected in the publicly available
maps.
32. An essential part of this modelling, and other analyses
underpinning strategic flood investment decisions, is a clear
understanding of the standard and state of repair of existing
flood defences and the areas they protect. At present the National
Flood and Coastal Defence Database remains incomplete, although
further information is available locally. It is essential that
this central resource is completed and readily available to all
stakeholders as a matter of urgency. In the future, medium term
investment plans should also be made much more accessible, so
that all stakeholders can ascertain relatively easily which areas
will benefit from schemes in the future, the standards of protection
these areas will benefit from and when the schemes will be complete.
FLOOD WARNING
AND CONTINGENCY
PLANNING
33. The Agency has a strategy in place to extend the
flood warning system where sufficient warning can be given, although
full delivery is some way off (the target is 78% of properties
by 2008). This will not only make the service more widely available,
and through a more extensive range of media, but will operate
on an "opt out", rather than opt in basis. According
to the Agency, currently only about 60% of those living in flood
risk areas say they are aware of the risk, and of these only 60%
have any pre-determined plans on action needed in the event of
a flood. Insurers regard the inclusion of flood risk status in
Home Information Packs as an essential step in ensuring better
understanding and support Agency efforts to secure agreement from
ODPM that this information should be required. Innovative approaches
to engage the public in personal contingency planning are also
needed.
34. The Agency is compiling a register of catchments
where the potential speed, depth and velocity of flooding would
cause extreme risk to life, a measure insurers fully support.
Events such as the flooding in Carlisle on 8-9 January 2005 demonstrated
the need for all first responders to such emergencies to have
pre-agreed evacuation plans, including the identification of vulnerable
people needing special assistance or medical support. Whilst it
is for Defra to take the lead in amending its Lead Department
Plan, we look to the Agency as the operational body to work with
all emergency partners in improving capability and preparedness
to deal with flooding emergencies.
35. The Civil Contingencies Act came into force in April
2005. The insurance industry is working with Government, including
the Agency, to assist in effective responses beyond the initial
emergency phase. The ABI welcomes this collaborative approach.
LAND DRAINAGE
AND SEWER
FLOODING
36. The ABI welcomes the inclusion of a more integrated
approach to land management in the Government's strategy for flood
risk management, set out in "Making Space for Water",
and proposals for significant funding (£2 million) of studies
in 2006 to develop integrated drainage partnerships.
37. Insurers welcome the leading role the Agency is taking
in developing a strategic overview across all types of flood risk
in urban areas. Given the Foresight study's estimate that the
number of people at risk from flash flooding in urban areas could
increase by up to 700,000 by the end of the century it is vital
that decisions on infrastructure, which have a long legacy, take
a holistic approach based on future flood risk. Integrated drainage
pilots will help assess the underlying causes of flooding in urban
areas, so that cost-effective solutions can be identified in each
case. The Agency, together with Defra, should ensure that there
is a clear mechanism set up to roll out the findings of these
pilots.
38. Whilst sewage flooding is primarily a responsibility
of the sewage undertakers, it is important that the Agency ensures
urban drainage plans fully integrate sewer system needs and address
problems arising from combined sewers and unprotected outfalls
(from treatment plants) into watercourses.
Association of British Insurers
December 2005
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