Supplementary memorandum submitted by
the Association of British Insurers (ABI) (FL114b)
The Committee asked for additional information
on a number of issues, detailed below.
It may also be of interest to the Committee
to note that in December 2007, the ABI published its own assessment
of lessons to be learnt from the summer floods, a copy of which
is enclosed.[14]
The report called on the Government to develop
a 25-year strategy to manage Britain's growing flood risk. We
argue that this should be based on:
— An investment programme that reflects
climate change and the real flood risks from rivers, coasts and
drainage.
— Improved national leadership and
coordination with national targets for reducing flood risk. A
single national body should be responsible for flood management
strategy to replace the current piecemeal approach.
— Stronger planning controls to ensure
that new developments are not built in high flood-risk areas.
The ABI also commissioned an exclusive opinion
survey, carried out by Populus in the areas affected by the summer
flooding (Yorkshire and Humberside, Gloucestershire and Worcestershire).
One of the main findings was that residents of the flooded areas
say that an overhaul of drainage systems is the most urgent measure
now needed to reduce the risk of future flooding.
The recent floods highlighted how vital the
insurance response is to the recovery process. The UK is unusual
in having flood cover included as standard in household policies
and in the vast majority of business policies.
Adequate investment in, and management of, flood
risk measures would enable insurance to continue to be widely
available, as envisaged under the Statement of Principles for
the Continuation of Flood Cover. Insurers need to see significantly
greater commitment from the Government, or substantial areas of
the country will face much higher premiums and deductibles in
the near term, and become uninsurable over the longer term.
SELECT COMMITTEE
ADDITIONAL QUESTIONS
Q1: The amount of uninsured households flooded
in the summer of 2007
We do not have data about uninsured households
flooded in the summer. However, using various Government statistics,
including The Household Expenditure Survey (HES) plus evidence
from our members, we estimate the number of uninsured households
in the UK is as follows:
— 93% of all homeowners have Home Buildings
insurance in place, although this falls to 85% of the poorest
10% of households owning their own home. This insurance is a standard
condition of a mortgage.
— 75% of all households have Home Contents
insurance in place.
— Half of the poorest 10% of households
do not have Home Contents insurance.
Q2: Flood defence schemes that have been delayed
or postponed due to the level of Government expenditure announced
in the Comprehensive Spending Review 2007 settlement
The Environment Agency and Defra hold the specific
information about flood defence schemes and the funding status.
Whilst the ABI does not have this information, we do assess the
cost benefits of flood defence improvements and the effectiveness
of investments.
Flood defence projects yield benefits of around
seven times the amount invested—meaning for every £1
spent, £7 would be saved in repair costs.[15]
For individual projects, the benefits may be as much as sixteen
times the investment. This level of return is much higher than
for other areas of public sector spending, like roads and railways.
This demonstrates both the excellent value of
such investment choices and the level of harm done to the economy
if we fail to invest. The Government's estimates (not including
the Summer 2007 floods) suggest that flood management reduces
the cost of damage by about £3 billion each year. Additionally,
improvements to flood management could reduce the costs of a single
major coastal flood event by between £3.7 billion and £6.8
billion.
In our East Coast of England research project[16]
we looked at the effectiveness of improved flood protection in
the light of rising sea level scenarios. The number of properties
at risk of flooding in eastern England rises by 48% from 270,000
to 404,000 following a rise in sea levels of 0.4m. (This assumes
no new building between now and the middle of this century.)
Assuming current levels of flood defences in
eastern England are not improved, the financial cost of a single
major coastal flooding event will rise to between £7.5 billion
and £16 billion once sea levels rise by 0.4m.
This is a cautious estimate, since it does not
include the long-term economic effects of this major level of
disruption, nor the impact on essential public services such as
hospitals, schools and emergency services.
Investment now in improvements to coastal flood
defences could reduce the number of properties at risk from 270,000
to 170,800. A rise in sea levels of 0.4m would then increase this
to 287,400 properties, roughly the same as today.
Q3: The differences in the flood mapping of
the Environment Agency and the insurance industry, and to what
extent the industry's maps incorporate meteorological information
such as possible rainfall intensity
Our members are using the Environment Agency's
Nafra data to assess flood risk. Some insurers have developed
their own models, which they use in addition to the Nafra data.
The ABI does not directly use these and it would not therefore
be appropriate to comment on these individual maps.
Please don't hesitate to contact me if you require
any further information.
Stephen Haddrill
Director General
14 Not printed. Available at http://www.abi.org.uk/BookShop/ResearchReports/Flooding%20in%20the%20UK%20Full.pdf Back
15
Flood and Coastal Erosion Risk Management ZBR-41st Defra Flood
and Coastal Management Conference July 2006 & National Assessment
of Defence Needs and Costs for flood and coastal erosion management
(NADNAC) Summary Report 11 June 2004 Back
16
ABI: COASTAL FLOOD Risk-Thinking for tomorrow, acting today, November
2005 Back
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