Bernadette Ballantyne, Infrastructure Intelligence: This summer the Flood Reinsurance Scheme (Flood Re) will become operational, offering affordable insurance cover to properties at a high risk of flooding.The Association of British Insurers, which is implementing the scheme, estimates that without it 300,000 to 500,000 homes would struggle to get insurance in the face of rising flood risk.
“It is better than having no insurance but it is really a missed opportunity,” says Dr Swenja Surminski a leading researcher on climate change adaptation and natural disasters at the London School of Economics, and formerly climate change adviser at the Association of British Insurers (ABI).Going forward if we want to have private insurance cover it is only going to work if we do enough to manage the underlying risk. Flood Re is there to provide insurance but it doesn’t have any mechanisms that would enhance underlying risk management.”
Introduced by Defra in June 2013, Flood Re is intended to provide cover to households at high flood risk over a 25 year period as part of a gradual transition towards more risk-reflective prices. These high risk homes will be covered by insurance companies who in the event of a claim will be able to turn to the ‘not-for-profit’ Flood Re fund, which is financed through both flood insurance premiums and a levy on home insurance. However experts are concerned that long term risk reduction will not be achievable without additional measures being implemented.
“Going forward if we want to have private insurance cover it is only going to work if we do enough to manage the underlying risk. Flood Re is there to provide insurance but it doesn’t have any mechanisms that would enhance underlying risk management.”
Last month Professor Lord Krebs, chair of the Adaptation Sub-Committee for the Committee on Climate Change wrote to Flood Re chief executive Brendan McCafferty urging him to do more to ensure flood risk reduction. “Flood Re should form the centrepiece of a twenty five year strategy that seeks to counter the increasing risk of flooding and reduce the number of households at high risk,” stated his letter, explaining that the scheme was not currently configured to achieve this.
Krebs pointed to several measures that would support risk reduction including ensuring that flood risk information provided by Flood Re to insurance companies is passed on to householders; supporting additional flood mitigation measures in high risk homes; placing flood risk reduction at the heart of the transition plan; targeting the benefits of Flood Re more keenly and calling on insurers to retain some risk as an incentive for claim costs to be managed. Surminski too has called for risk reduction mechanisms to be incorporated into Flood Re starting with making risk reduction the main objective.
In a paper published in January 2014 she called for households to be made aware of their flood risk and the measures in place to protect them. She also called for homeowners to be informed that they are benefitting from subsidised insurance. “It might be that a homeowner has no idea whether they fall under Flood Re or not. Unless people understand where they are with regard to flood risk how can you expect them to take action?” To read more go to:
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