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Memorandum submitted by the Association of British Insurers (ACC24)
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 Introduction The ABI has promoted adaptation for some time. We believe the predicted changes in the climate pose a threat to the economy and to our way of life. In 2007, the summer floods alone caused more than £3bn of insured damage and the total disruption to the economy was far greater. The Stern Review shows that taking action now will be more cost-effective than taking action later. The ABI welcomes the Government's
work on adaptation. The draft Flood and Water Management Bill is an important
step to make However, we believe that the issue of adaptation must be pursued with more energy. Summary · The Environment Agency's long term investment strategy shows that even if spending on flood defences is increased by £20m per year (until 2035), flood risk will still only remain at current levels. Therefore, we cannot afford not to invest in flood defences. Insurers can only continue to provide cover for properties where the flood risk is adequately managed. · As in the Climate Change Act, the ABI would like to see clear legally-binding targets for adaptation, particularly the number of homes and businesses at risk from flooding. · There should be a clear public scrutiny process of how local authorities, the Environment Agency and the Government deliver on their adaptation objectives. · It is important that new developments are built to withstand the challenges faced by climate change. · We need to create an open culture of sharing information between all stakeholders and increasing risk awareness. Funding 1. We cannot afford not to invest in flood defences. The Environment Agency has recently published its long term investment strategy which shows that an additional £20m per year (until 2035) of investment is required just so the same number of properties can be protected as today. In other words, a doubling of expenditure will not reduce the problem 2. Our own research shows that adaptation
investment can be very cost-effective: for example, flood defence expenditure
in the 3. The ABI welcomes Defra's and the Environment Agency's work on the long-term investment strategy and we will engage in the public debate about future investment needs.
Monitoring and Evaluation of Work on Adaptation Targets 4. 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 e.g. 2015, 2025 and 2050, following the precedent set in the Climate Change Act. We hope this will be included in a future Flood and Water Management Bill. Public scrutiny and accountability 5. The draft Flood and Water Management Bill sets out new responsibilities and duties for the Environment Agency and Local Authorities, as recommended in the Pitt Review. It is essential to develop a clear public scrutiny process of how the Environment Agency, national Government and Local Authorities perform and deliver on the new duties set out in the draft Bill. Otherwise, it is difficult to hold the Government and Local Authorities democratically accountable and there is a risk that it is only apparent that flood risk is not being managed adequately when an avoidable flood event happens, and by then it is too late.
Reducing the numbers of homes at risk from flooding 6. 1 in 6 homes is at risk from flooding. As mentioned above, even if the Government spends £20m a year for the next 25 years on flood defences, the level of protection will still only remain at today's levels. It is essential to manage this risk by: offering advice and information to the public; providing clear guidance to developers; making high-risk homes more resilient to flooding; and producing research to help understand the risk. Regulation of new developments We must not allow new developments to create additional flood risk. 7. The ABI has recently published its Guide on Insurance Issues for New Developments to help ensure that new developments will stand up to the challenges posed by climate change. This guide can be found on the ABI's website (www.abi.org.uk). 8. Insurers want to be able to continue to offer affordable property insurance to as many people as possible. This is important because without insurance, mortgages are difficult to obtain and properties are virtually unsellable. However, to achieve this, the risk must be managed. 9. The ABI's key messages for new developments are: · Buildings must be located and designed to ensure that they are able to withstand climate change - particularly increased flood risk · Insurers will only be able to insure buildings - vital to ensure that they are sellable - if this risk is managed to acceptable levels · We recommend that developers: o Follow National Planning Policy Statements o Provide buyers with information on climate risks and how they are managed o Develop publicly-available standards or kitemarks that certify enhanced resilience to climate change impacts o Before buying a property in a new development, prospective owners should check the flood risk and obtain information on measures taken to reduce it. Identifying risk and information sharing 10. We need to create an open culture of sharing information between all stakeholders and increasing risk awareness. The information gathered under the EU Directive - preliminary flood risk assessments, flood hazard maps, flood risk maps and flood management plans - needs to be communicated effectively to the public. To ensure that flood insurance remains as affordable and widely available as possible, it is also important that this information is provided to insurers, in a convenient administrative format.
October 2009 |