Memorandum submitted by The Association
Of British Insurers (DFWMB 03)
The Association of British Insurers (ABI) is
the voice of the insurance and investment industry. Its members
constitute over 90% of the insurance market in the UK and 20%
across the EU. They control assets equivalent to a quarter of
the UK's capital. They are the risk managers of the UK's economy
and society. Through the ABI their voice is heard in government
and in public debate on insurance, savings, and investment matters.
SUMMARY
1. The Draft Flood and Water Management
Bill is a vital first step towards implementing the recommendations
of the Pitt Review to make homeowners in England and Wales safer
from flooding.
2. The ABI wants to see the Flood and Water Management
Bill:
— Create strong national leadership
on flood management, with targets to reduce flood risk. The Environment
Agency should have a statutory duty to reduce flood risk.
— Establish new powers and responsibilities
to tackle surface water flooding. Local authorities need to be
legally responsible for assessing and reducing surface water flooding,
and produce surface water management plans.
— Promote community action to reduce
flood risk. This should include requiring the Environment Agency
and local authorities working on solutions, such as flood resistant
and resilient measures, to help any homes and businesses that
it is not practical to defend from flooding.
— The Bill needs to be accompanied
by a long-term funding strategy to secure the investment needed
to protect communities and businesses from flooding.
INTRODUCTION
3. The floods of 2007 cost the insurance industry
around £3 billion, which included responding to approximately
165,000 claims. This is the equivalent of four years normal claims
experience. These floods presented the industry with one of its
biggest ever challenges and the ABI has been working hard to ensure
flood risk is sufficiently managed.
4. Climate change and its impacts are of particular
importance to the insurance industry in the UK because we are
one of a very few countries where the private sector fully protects
people against the costs of flooding, a standard part of insurance
cover. Almost everywhere else in the world, that cost falls on
the taxpayer. As an industry, we remain committed to providing
flood cover for the vast majority of households and small businesses,
but this must be matched by a similar commitment by Government
to continue to invest in defences and providing the appropriate
protection against flooding.
5. The ABI wants to ensure that flood risk is
managed effectively and that as many people and businesses as
possible are able to access affordable home and business insurance
to protect themselves from the financial cost of flooding. Under
our flood agreement with the Government of July 2008, insurers
committed to continuing to provide flood insurance to the vast
majority of customers until 2013. In return, the Government gave
an overarching commitment to ensure that flood risk is appropriately
tackled and long-term commitments made during this period to ensure
that the competitive market will be able to deliver affordable
flood insurance for the vast majority of customers by 2013.
6. On 28 April we launched our proposals for
the Flood and Water Management Bill at a Parliamentary reception
on future flood risk management.[15]
49 At the event, both the Floods Minister, Huw Irranca-Davies,
and his shadow, Anne McIntosh, underlined their commitment to
deliver reform. This is encouraging and we urge all Parliamentarians
to produce a rapid consensus so that the Bill can be introduced
in the Autumn and passed before an election.
7. We will continue to work with Parliament to
ensure that the best possible legislative framework is in place
to enable us all to minimise the social and economic devastation
caused by flooding.
8. During the passage of the Bill, we call on
everyone involved in the fight against flooding to do as much
as possible within the current legislative framework: the debate
on the Bill should be a cause for action and not inaction.
GAPS IN
THE CURRENT
DRAFT BILL
9. The Floods and Water Bill is a vital step
on the road towards achieving a modern flood risk management system
in England and Wales. Without it, flood insurance may become harder
to access and more expensive. While still assessing the full implications
of the proposed legislation we are supporting the overall policy
direction taken. But we are also concerned about several important
aspects that have not yet been adequately addressed by the draft
proposals.
Need for binding targets and long-term funding
arrangements to ensure implementation of the new legislation at
national and local level
10. The ABI welcomes the Climate Change Act,
which sets clear, legally binding targets to reduce carbon dioxide
emissions. The Government should take a similar approach to reducing
the number of properties and businesses exposed to flooding. It
should set legally binding targets for reducing the number of
homes and businesses at different levels of flood risk by eg 2015,
2025 and 2050, following the precedent set in the Climate Change
Act. This would reflect the Stern report's conclusion that adapting
to climate change is a similarly important national challenge.
This should be included in the draft legislation.
11. The ABI proposes that the Environment Agency
should produce regular reports directly to Parliament, setting
out its own independent assessment of how Government is meeting
the flood risk management targets and the associated funding requirements.
The Government could then endorse or challenge its recommendations,
and be accountable to Parliament for this.
12. The current approach to flood defence is
inherently short term. Money is found in three-year tranches even
though some projects have much longer lead times and the capital
investment has a long lifespan. We welcome the Environment Agency's
current work to develop a longer-term strategy and call for the
Agency to be allowed to develop this independently and for it
to be presented directly to Parliament before the end of this
Parliamentary session. This should include a hierarchy of flood
risk management projects planned over the following five-year
period and an outline of longer-term priorities over the succeeding
five- and twenty-year periods. This should be updated and reported
to Parliament regularly.
13. Many of the proposed measures in the draft
Bill will require additional funding at local level. The Bill
needs to ensure that sufficient funding sources are available
to finance the new powers and responsibilities.
The right balance between national leadership
and local empowerment
14. The Pitt Review and other independent examinations
of the floods of summer 2007 have all called for a more coherent
and clear allocation of roles for flood risk management. The current
approach is too fragmented, with no single body responsible for
the overall identification and reduction of flood risk. As a result,
our knowledge of the true risk of flooding from rivers, drains
and the sea is incomplete.
15. We support the proposals in the draft Bill
to provide the Environment Agency with a new national leadership
role, with direct responsibility for tackling national flood risk
from all sources. But we are concerned that there is not enough
clarity on how to support local authority implementation of their
own new responsibilities, such as surface water management, flood
risk information collection and flood resilience.
16. While one national body needs to be given
overall responsibility for the fight against flooding, this should
not mean unnecessary centralisation or national control. Instead,
this national body needs to lead analysis and research to assess
flood risk and to lead work in partnership with local authorities
to develop a holistic approach and national framework to reduce
this risk. The current draft proposals do not adequately create
the necessary balance and support mechanisms between central and
local government.
New powers and responsibilities to tackle surface
water flooding
17. The ABI recently completed research that
provided professional independent consultancy support for two
local authorities to help them prepare surface water management
plans. This has helped these two local authorities make progress
in considering their own surface water needs, and enabled the
ABI to draw conclusions about the legislative changes needed in
the Floods Bill to ensure that local authorities are able to tackle
surface water flood risk effectively. A full summary of our research
is given in Urban Surface Water Management Planning: Implementation
Issues.[16]
50
18. We welcome the proposals in the Draft Bill
to establish clear legal duties and powers for local authorities
to become the lead local body for assessing and reducing surface
water flooding, but we are concerned about the remaining gaps.
There need to be very clear provisions to end the "right
of automatic connection" to the drainage system for new property
developments. The draft Bill does not adequately enshrine the
rights and responsibilities of waterway owners to ensure that
landowners are rewarded for ensuring their land management activities
support local efforts to reduce flood risk, and restricted from
inappropriate activities. More clarity is needed.
Funding for community schemes to increase flood
resilience
19. Flood defences are an essential measure to
protect us from flooding and we need to ensure that we have a
strong long-term investment strategy for our defence assets. But
we also recognise that this will not be cost effective for all
areas—some small communities, in remote parts of the country
may not benefit from defence schemes in the future. Homeowners
need more clarity and transparency from Government and the Environment
Agency; they need to know if they will continue to benefit from
defences or if their individual flood risk is likely to increase.
20. The Bill needs to require the Environment
Agency and Local Authorities to work together to liaise with all
homes and businesses that it does not expect to be able to protect.
21. The ABI recently conducted research into
"Resilient Reinstatement: The Cost Of Flood Resilient Reinstatement
Of Domestic Properties".[17]51
The research highlights the cost-benefits to flood resilience
and the existing barriers to wider uptake. It is likely to be
more cost-effective and appropriate for some homes and businesses
to be protected through property-level actions to reduce flood
risk: either action to reduce the amount of flood water that will
be able to enter the property ("resistance" measures)
or action to reduce the damage caused when flood water enters
the property ("resilience" measures). But feedback from
customers affected by the floods of summer 2007 has also highlighted
that there are several barriers that need to be overcome to encourage
more people to protect their own homes: people don't understand
probabilities and levels of flood risks and homeowners expect
Government to protect them.
22. If we are to overcome these barriers, everyone
involved in flood risk management will need to play their part:
providing information and impartial advice will be essential to
trigger risk management at individual level. The ABI will work
with the National Flood Forum to produce a clear factsheet that
insurers and loss adjustors can use when talking to customers
who have been flooded, so that they can make an informed choice
about whether to build in flood resilience as their home is repaired.
This will include advice to customers that building in resilience
features will make their home easier to insure in the future and
help secure better terms, for example a lower excess or premium.
23. The Bill needs to empower local authorities
to provide and coordinate free property-level flood risk surveys
to inform about individual flood risk, and provide support for
homeowners and businesses willing to modify their property to
make them more resistant and/or resilient to flooding and remove
existing legislative provisions that constrain this.
May 2009
15 49ABI: ABI Proposals for the Flood and Water
Management Bill, published April 2009, http://www.abi.org.uk/Members/
circulars/viewAttachment.asp?EID=22777&DID=17677 Back
16
50ABI: Urban Surface Water Management Planning: Implementation
Issues, published April 2009, http://www.abi.org.uk/ BookShop/ResearchReports/20090423%20SWMP%20report13.pdf Back
17
51ABI: Resilient Reinstatement: The Cost Of Flood Resilient
Reinstatement Of Domestic Properties, published April 2009,
http:// www.abi.org.uk/BookShop/ResearchReports/20090423%20RR%20Report14%20(2).pdf Back
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