Brendan McCafferty, CEO, Flood ReI have one clear focus for 2015 – to deliver Flood Re. Easy enough to say, but these four simple words describe an incredibly complicated project.
But now that the scope is set, and having agreed on some fundamental points before Christmas, we can now make this hugely important initiative for hundreds of thousands of families and households a reality. Flood Re’s key objective is very clear: to enable affordable flood cover to remain available for households across the UK.
Of course, if you apply the standard tests used by Government for assessing value for money to Flood Re – as the letter from the Committee on Climate Change does – it could lead you to conclude that it does not represent good value for money. But this would be the wrong way to analyse how worthwhile Flood Re is. From a taxpayer perspective, Flood Re is the right solution – a position that has been agreed across the political spectrum.
The reason is simple – that it makes no sense for the taxpayer to carry the risk that weather events have the potential to cause: losses measured in the hundreds of millions and billions of pounds. Flood Re will reinsure homes and their contents to the value of many tens of billions of pounds. That is why an insurance industry solution is needed. This ‘risk’ is unlikely to be measured effectively in a short term financial evaluation.
For the homes reinsured by Flood Re – existing homes that are by definition vulnerable to the threat of flooding – the value for money of the scheme is likely to be beyond question: ensuring they will still be able to secure a mortgage, helping to relieve the huge psychological damage caused by flooding, and allowing people to concentrate on more important things in life than worrying about affordable home insurance.
Community resilience will benefit hugely as well from enabling the insurance industry to carry on doing what they have proven to do best: helping their customers recover quickly from the devastation of flooding. Again, such factors will not be reflected accurately in any standard assessment of value for money.
The Government has rightly included in the regulations that Flood Re should help to transition the home insurance market to risk-reflective prices. On this, I agree with the sentiment of the Committee on Climate Change’s letter: that Government has an opportunity to make a step-change in how flood risk is managed, and a choice about whether we want risk-reflective prices in 25 years to be affordable or not.
A strategic approach to water and land management, with commitment from all Government departments, is the only way this can be delivered – investment in and maintenance of defences and an end to inappropriate development being the fundamental core to such an approach. The ABI’s Flood Free Homes campaign makes precisely this point and it is gathering widespread support around the country. In short, if flood risk is managed in a sustainable way nationally, prices that reflect that risk will be more likely to be affordable.
With the continued support of the industry, my job is to deliver Flood Re – a task the nature of which nobody else in the world has done before. We have a strong chance of making this happen if we stay focused on its key objective, which is of almost immeasurable value to hundreds of thousands of households that are relying on us to succeed.
Brendan McCafferty is Chief Executive of Flood Re.