Memorandum submitted by Royal & SunAlliance
(FL 73)
1. INTRODUCTION
1.1 Royal & SunAlliance (R&SA) is
the third largest general insurer in the UK, providing over 1.3
million private homes with household insurance. In addition we
also cover many thousands of businesses, from small enterprises
through to large multinational companies against risks including
flooding.
1.2 Our commercial interest in flooding
has meant that we have been closely involved in policy debates
around flooding for a number of years. Our experience in mapping
flood risk and handling claims from customers who have suffered
from flooding, means that we have been able to provide useful
input and insights to those debates. We have previously given
evidence to the EFRA Committee as part of your inquiry into the
Environment Agency and since then have been closely engaged in
discussions with Government about the need to increase investment
in flood defences in order to mitigate flood risk.
1.3 Following the devastating flooding events
of June and July, we have worked hard to ensure our customers
are able to return to their homes as quickly as possible. As
soon as the floods occurred, we sent emergency response teams
to the affected areas to provide help and assistance to our customers.
This process was greatly helped by the use of our Geographical
Risk Assessment (GRA) tool, which enabled us to identify areas
of greatest risk and ensure that our resources were targeted at
those customers in most immediate need of assistance. Since the
floods have subsided, we have worked to settle claims as quickly
as possible, making emergency payments where appropriate.
1.4 Whilst a full analysis of the implications
of the recent floods for our assessment of flood risk across the
country and indeed for the insurance market as a whole will take
time, our initial analysis of events this summer has highlighted
four key areas of concern:
— Problems in the management of the
UK drainage system—This summer's flooding has highlighted
real weaknesses in the current drainage infrastructure. This
highlights the importance of effective drainage management, alongside
investment in flood defences, if increased flood risk is to be
effectively managed.
— Lack of access to Flood Defence Data—In
the light of the extreme events of this summer, it is critical
that insurers are provided with access to the Environment Agency's
National Flood and Coastal Defence Database, in order to allow
them to continue to properly assess flood risk and maintain effective
cover for homeowners.
— Need for investment in flood defences
in the near term—Though we welcome the Government's commitment
to increase annual expenditure on flood defences to £800
million by 2010-11, the severe flooding events of this summer
highlight the need for this increased investment to come on stream
as soon as possible in order to minimise the risk of a repeat
of these floods. The scale and severity of this summer's floods
must also raise questions about whether this level of investment
is going to be sufficient.
— Ensuring the planning system prevents
building in areas of high flood risk—in the light of the
flood events of this summer it is even more important that planning
permission is not granted for land where there is severe flood
risk.
2. MANAGEMENT
OF UK DRAINAGE
2.1 Drainage has emerged as a new risk that
is potentially equal in importance to the state of flood defences.
Our experience of helping customers in flood hit areas in Yorkshire
and Hull has been that in many cases their properties were exposed
to flooding as a result of drains over flowing, rather than a
failure in flood defences, or rivers bursting their banks.
2.2 The monsoon type rainfall that is becoming
more common in the UK presents a different type of flood risk,
and one that Royal & SunAlliance is currently considering
how we can best assess the level of risk when setting the premiums
and terms we offer to our customers.
2.3 In order to minimise the flood risk
posed by drainage, and provide essential reassurance to homeowners
and the insurance market, we believe that the Government should
prioritise work to look at ways in which the strategic management
of drainage systems across the UK could be made more efficient.
At present the way in which drains are managed seems to vary
widely and there is a lack of information about who owns the various
drains, who is responsible for their upkeep and the frequency
of maintenance. The recent independent report into the Hull flooding
was critical of the difficulties caused by having multiple agencies
responsible for different parts of the drainage system with little
cooperation on operation, investment and design[13].
These are all issues that need to be resolved
urgently both in order to manage the risk of future flood events
and in order allow insurers to properly assess flood risk.
3. ACCESS TO
FLOOD DEFENCE
DATA
3.1 It is our understanding that the Environment
Agency's National Flood and Coastal Defence Database (NFCDD),
contains information about where defences are, what level of protection
they provide and when they were last inspected. However, at present
this information is not available to the insurance industry, in
spite of the important role the NFCDD could play in helping insurers
provide cover to as many customers as possible.
3.2 Following the flood events of this summer,
R&SA, alongside other insurers, will have to carefully reassess
areas of high flood risk to ensure that we have an accurate understanding
of where at-risk properties lie. This task will be greatly complicated
by a lack of up-to-date information on flood defences, with the
result that homeowners may find themselves paying higher premiums
than they might otherwise need to.
3.3 Under the Statement of Principles agreed
with the Government, insurers have undertaken to continue offering
flood cover to properties where there are plans to complete flood
defences during a five year period. At present, the Environment
Agency is unable to provide insurers with information about building
plans beyond their current annual budget period, so in effect
insurers are covering properties outside of the parameters agreed
within the Statement of Principles.
4. INVESTMENT
IN FLOOD
DEFENCES
4.1 Whilst R&SA recognises that flood
defences will never offer a complete solution to the problem of
flooding, we know from our experience, that strategically placed
and well-maintained defences can have a substantial impact in
mitigating flood risk. It is for this reason that we have argued
for the last two years that the Government should significantly
increase investment in flood defences. As such we welcomed this
Committee's recommendation in your 2006 report on The Environment
Agency (to which we gave evidence) that investment in flood defences
should be increased over time to £1 billion per annum.
4.2 In the wake of this summer's floods,
the Government did indeed announce an increase in flood defence
investment to £800 million per annum by 2010-11, however
in light of the previous recommendation of this Committee and
given the level of increased flood risk highlighted by the flooding
of June and July, we believe that it is critical that:
— Increased investment is made in the
immediate short term and not delayed until the end of the forthcoming
Spending Review period;
— Spending must be allocated appropriately
across river, coastal and drainage systems;
— Given the increased level of flood
risk exposed by this summer's floods and in the light of the Environment
Agency's statement that they already have a £150 million
per annum backlog of repairs, the overall level of investment
needs be re-assessed upwards.
4.3 Whilst we think these points add up
to a case for increased flood defence spending to take effect
as soon as possible, there is a wider issue of how strategic thinking
on flood defence spending operates. One of the reasons that the
Environment Agency cannot tell insurers where they plan to complete
flood defences over a five year period is because they are only
allocated the budget for this work over a twelve month period.
This prevents them being able to plan ahead beyond twelve months.
4.4 It is notable that in recent years,
increases in flood spending in Spending Reviews (SR) have only
been made after significant flood events have taken place, for
example in the SR02 (following the Autumn 2000 floods) and the
CSR07 (following the recent flooding). In the SR04, where there
had been no serious flooding events in 2001-2003, there was no
increase in flood defence spending, and indeed with no inflationary
increases applied the result was a decrease in real-terms. We
feel that it would be better to put a holistic flood management
programme in place for the longer term and that budgeting should
be set over a longer time frame, with flexibility for it to be
increased should events require it.
5. ENSURING THE
PLANNING SYSTEM
PREVENTS BUILDING
IN AREAS
OF HIGH
FLOOD RISK
5.1 The floods of this summer demonstrated
the potentially disastrous effects of building on floodplains.
R&SA would question whether it is feasible to adequately
defend such properties from flooding. It is also very important
to understand the knock on effect to existing surrounding properties
where the flood risk is increased because the protection they
previously enjoyed by the floodplain holding the water has been
removed.
5.2 R&SA has welcomed the new PPS25,
which makes the Environment Agency a statutory consultee for all
planned developments in flood risk areas. We see PPS25 as a critical
tool in preventing inappropriate building in areas of high flood
risk. Should the EA's objections/requirements be ignored, we believe
it is essential that the Secretary of State make effective use
of their powers and to be prepared to call in all such applications.
5.3 It is also worth noting that new building
puts pressure on existing developments. The floods of summer
2007 impacted many homes and properties in low flood risk areas
because of the pressure put on the drainage systems from newer
properties. All new building should take account of its impact
on existing drainage systems, which may lead to increased flooding
in the local area.
6. CONCLUSIONS
6.1 The flood events of 2007 have given
added momentum to a longer-term process of strategic thinking
about flood management in the UK that originated with the floods
of 2000. During this period, there has been much valuable work
carried out by Government, the Environment Agency, local authorities,
industry and scientific bodies and NGOs. Progress has been made
in raising the profile of flooding as a challenge for the UK and
in seeking to find solutions to manage it.
6.2 However, we would point out that these
key milestones have occurred over a period of seven years since
the original floods of 2000 indicated that serious action was
required to manage flooding and coastal erosion across the UK.
Some initiatives are yet to take real effect, such as future
work on the Thames Barrier to ensure London remains protected,
or DEFRA's resilience pilots which are only now being launched.
6.3 The events of summer 2007 show that
there is no time to be lost, and that immediate action must be
taken to increase flood defence spending, clear the backlog of
repairs, build new defences, better manage our drainage systems
and prevent potentially disastrous and unsustainable building
in high flood risk areas. In addition, there must be clarity
for the public and the insurance industry about the Government's
plans, and insurers must be allowed access to publicly-funded
databases.
We welcome the Committee's work on this important
subject, and are happy to offer further help to the Inquiry.
Royal & SunAlliance
August 2007
13 Hull City Council, Independent Review Body: Interim
Report, August 2007. Back
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