Flooding is a dreadful experience, not just during the storms but long afterwards too. The ABI estimate insurers will make payments to customers hit by Storms Ciara and Dennis of over £360 million. The average household flood claim is expected to be £32,000. This is a stressful and disruptive period for people, as well as a challenge for governments and industry.
Which isn’t unique to the UK. The Director of the Centre for Disaster Protection, Daniel Clarke, was recently quoted in the FT saying: “There is a challenge in the way the world pays for disasters, waiting for them to happen and then paying for them, rather than preparing in advance.”
There was good news in the Budget, £5.2 billion for flood protection will allow the Environment Agency to invest in infrastructure and nature-based solutions so that otherwise vulnerable communities have better protection against flooding and are more resilient when it happens. More details of about how we plan to do this are set out in the Flood and Coastal Erosion Strategy we plan publish soon.
George Eustice, the Secretary of State for the Environment, has said: “Climate change is making the UK warmer and wetter, and we will be visited by extreme weather more frequently in the future. So we need to shift gears, to ensure we adapt and become more resilient.”
As the climate emergency makes floods more frequent and severe we need to ensure that when we rebuild we are not reverting to systems designed for a gentler time. To me the ABI’s objective “Helping Britain Thrive” involves more incentives for people and businesses to build back better after a flood.
I was pleased when ABI Chair Jon Dye highlighted that bigger flood defences aren’t enough. There is a clear need for more affordable homes, but it is short-sighted to build these in areas of high flood risk. We should insist that development only happens there if there is no real alternative, and that any such development doesn’t increase other people’s flood risk, which means insisting on things like sustainable drainage, and that properties are flood resilient. This can be done by installing property level resilience, like raised electrics or sealed floors.
The Environment Agency will continue to work with Flood Re and the property flood resilience industry to encourage greater use of property flood resilience measures. The Code of Practice and guidance for property flood resilience is a great start.
This all goes hand in hand with the UK’s climate change ambitions. In June, the UK became the first G20 country to set a net-zero target by 2050. The Environment Agency has set itself the goal of becoming a net zero organisation by 2030 to help show the way.
We want to see climate adaptation included alongside carbon reduction measures in all new finance products. For example, green mortgages could cover sustainable drainage systems and greywater reuse systems alongside energy efficiency. We plan to work with the Green Finance Institute on this and welcome your industry’s help.
To help Britain thrive, our thinking needs to change faster than the climate. I hope that we can work together to identify financial incentives that encourage companies to invest in the resilience of assets and infrastructure.
The Governor of the Bank of England has said: “Achieving net zero will require a whole economy transition – every company, every bank, every insurer and investor will have to adjust their business models. This could turn an existential risk into the greatest commercial opportunity of our time.”
The insurance industry is the best of the financial services at analysing that risk, now is the time to start realising the opportunity.