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The Jubilee River story - Flood Insurance - Latest

Maskirovka – a Soviet military term for disinformation and deception.

My view is that spending on 'flood risk management' is not the same as 'reducing the probability of flooding'.

It seems to me that the Government and the Insurance Companies are preparing to abandon the 10% of the population at risk of flooding!

EL 11/3/2012

11/3/2012 - John and Martin O'Niell have produced an interesting short paper (published by the Joseph Rowntree Foundation) - concluding that if the UK flood insurance regime moves further towards a free market, it will be at the expense of fairness and social justice.

 Social justice and the future of flood insurance (283kB.pdf)


Flood-hit homeowners should invest in own defences, says minister

Remark comes as agreement ensuring flood-hit householders can buy cover for their homes is due to expire in June 2013

Benyon said households should be encouraged to invest in their own flood defences. Photograph: Owen Humphreys/PA

Householders at risk of flooding should take responsibility for preventing future damage to their homes despite the fact that this may not reduce the cost of their insurance or even guarantee that they can buy flood cover, the government has said.

Richard Benyon, the minister for natural environment and fisheries, confirmed that a five-year agreement between the insurance industry and the government to ensure flood-hit householders can buy flood cover for their homes would not be renewed when it ends in June next year.

"Renewing [the agreement] would not solve the problem," Benyon said at a conference on flooding on Wednesday afternoon.

"The current agreement does not apply to the majority of households at significant flood risk, nor does it apply to homes built since January 2009. It provides no universal guarantee of flood cover, as many claim it does. Nor does the agreement influence the pricing of policies."

The agreement, known as the Statement of Principles, is crucial for those households that have already been flooded as it means that insurers will continue to provide cover for existing customers, albeit at a higher premium, as long as the government continues to improve flood defences.

However, following a substantial investment in flood defences by the Labour government, the current government has cut funding.

The insurance industry believes the government has now reneged on its part of the deal and consequently it does not want to continue with the agreement, a situation that leaves thousands of households at risk of becoming uninsured by next summer.

Benyon said households should instead be encouraged to invest in their own flood defences, including the installation of air brick covers, non-return valves and seals for cat flaps.

Referring to a review of the government's scheme that provides home surveys for households at risk of flooding he said: "The review has shown that property-level protection is cost-effective and the study has underlined the practical help and emotional reassurance that this form of protection gives to people who are at risk of flooding."

However, he will also acknowledge in his speech that householders who improve their properties may still be unable to afford insurance.

"The lack of recognition by insurers of property-level protection is still a significant barrier to the wider take-up of such measures," he said.

"This is just one of the reasons why we are working together with the insurance industry towards the announcement in the spring of a new shared understanding which sets out more clearly what individual customers can expect from their insurer, and from government."

It is unclear what the "shared understanding" will constitute, but Benyon will make it clear this afternoon that the government will not subsidise households' flood insurance.

In other countries, flood risk is covered by the government or a partnership between the state and the insurance industry. In the US, for example, catastrophic flooding is typically excluded from private insurance policies for high-risk areas and is covered by a federal national flood insurance programme.

The programme aims to make flood insurance available to those in areas of high flood risk. In France, the insurance industry collects a compulsory premium for natural disasters that is standard in policies and which is charged regardless of the level of risk. The state acts as the re-insurer and hence guarantees payments as the insurer of last resort.

The Association of British Insurers (ABI) said at the conference that it has put a proposal to the government that would see flood insurance offered through a pooling mechanism.

"Insurers will continue to manage most flood-related claims – helping people to get their lives back together following a flood. And entry into the scheme would be set at an agreed threshold," said James Dalton, assistant director of general insurance at the ABI.

"There would be no significant change to the way customers access insurance and a more competitive and innovative insurance market should emerge over time. The model allows for property-level resistance and resilience measures to be taken into account by insurers."

He added: "Naturally, how the government chooses to provide the support necessary for the scheme is up to them, but it could easily be funded by a small and formalised contribution from those purchasing home insurance."

The Joseph Rowntree Foundation has also released a report at the conference that argues against insurers pricing out flood-hit households purely based on risk and calls for further government intervention.

"The purely market-based alternative threatens to leave many thousands of properties uninsurable, leading to extensive social blight," its authors say, concluding that "there is an overwhelming case for rejecting a free market in flood insurance after 2013".

Charles Tucker, chairman of the National Flood Forum, the charity running the conference, said: "We believe this gives overwhelming weight to the case for government to step up to the plate to ensure that the market in flood insurance is fair and equitable. On present evidence they need to do more."

Gavin Shuker, the shadow minister for water and waste, said: "'This Tory-led government is playing Russian roulette with people's homes and livelihoods. Catastrophic flood risk is something we all need to tackle together.

"Ultimately, catastrophic risk resides with us all – a denial of this basic political principle is like trying to deny gravity. It is short-sightedness of the worst kind. We need leadership from government in ensuring the flood investment is made, and to put in place a framework that will ensure high-risk homes are able to access the protection they need."

What other countries are doing about flood risk

France: There are constitutional guarantees of the principle of solidarity for natural disasters. The preamble to the 1946 constitution says: "The nation shall proclaim the solidarity and equality of all the French people with respect to burdens resulting from national disasters." In practice, insurance is provided through a partnership between the state and the insurance industry. The insurance industry collects a compulsory premium for natural disasters that is standard in policies and which is charged regardless of the level of risk. The state acts as the re-insurer and hence guarantees payments as the insurer of last resort. Insurance payments are made in the event of a state announcement of a state of natural catastrophe. Similar solidarity-based models of insurance involving partnerships between the state and insurance industry operate in Belgium and Spain.

Netherlands: Flooding is typically excluded from insurance policies in the Netherlands. Under the Calamities Compensation Act (1998), the state is responsible for losses due to floods which are not covered by private insurance.

Iceland: The country operates a compulsory insurance regime for natural disasters including floods under a public insurance company, Iceland Catastrophic Insurance.

Germany: Major flooding is principally covered by public compensation packages. Private risk-differentiated insurance is available but there is very low take-up of such insurance.

USA: Catastrophic flooding is typically excluded from private insurance policies for high-risk areas and is covered by a federal national flood insurance programme. The programme aims to make flood insurance available to those in areas of high flood risk – "Special Flood Hazard Areas". It offers insurance to those within communities that are part of the programme, where insurance is conditional on the communities adopting plans that reduce future flood risks.

• This article was amended on 9 March 2012. The original said that the government will not subsidise households at risk of flooding. This has been corrected.

- latest statement (extracted from Hansard) 22 Feb 2012

Parliament UK

22 Feb 2012 : Column 301WH

Ian Paisley (North Antrim) (DUP): Will the Minister share those examples, principles and policies with the Northern Ireland Executive, because we obviously have coastal erosion and areas of flooding in Northern Ireland, which, frankly, the authorities have been dilatory in managing and dealing with? It would be worth while sharing with our own Government in Northern Ireland the examples that the Minister has shared with hon. Members, so that we can learn from them.

Richard Benyon: I am happy to share everything. There are no state secrets in what we are doing here. We just want more schemes to go ahead. I am happy to share examples with ministerial colleagues, the Northern Ireland Executive and anyone else who is interested.

We are learning and our learning curve is steep. I am impressed with how the Environment Agency has implemented this new scheme over this year. The fact that we are able to take on more than 60 new schemes in the indicative list for the coming year shows that it is working.

Let me answer some other points made by the right hon. Gentleman. He defined the statement of principles as ensuring that insurance was available to every household and used the words, “at reasonable rates”. Actually, that is inaccurate. The statement of principles does not influence pricing. It never did; that is part of the problem. Some 2,500 homes in my constituency were flooded in 2007, many of which can get insurance because of the statement of principles, but the high premiums and high excess charges are really testing some people.

Is there urgency about how we progress in our dealings with the insurance industry? Absolutely. Do we want an arrangement moving forward from 20 June 2013 that still ensures that insurance is widely available? Absolutely. We will make an announcement in the spring that will give a full year for new systems to be in place, providing clarity and ensuring that insurance is freely available. We hope that we will also be able to announce that there will continue to be some sort of pool arrangement for those in flood-risk areas who are on low incomes. That is important.

22 Feb 2012 : Column 302WH

It is also important to note that partnership funding has weighting for communities where there are high levels of deprivation, because we recognise that there is a lack of capacity in many such areas to take forward schemes under partnership funding and there is a desperate need to resolve these issues so that some vulnerable people can be protected. Therefore there is a weighting in favour of such systems.

In the past, insurers have charged everyone in a pool system, so that constituents of the right hon. Gentleman, and mine, who do not live in areas of high flood risk are subsidising those who do. The statement of principles always was going to end in 2013, whoever was in Government. We are desperately keen to find a solution that takes things forward.

The Association of British Insurers, which is, rightly, a lobbying organisation on behalf of large financial institutions, says that it needs a Government subsidy—a taxpayer subsidy—for the insurance industry. That is not realistic, but we think that there is a way forward and that we can work with the industry and find a solution. I assure the right hon. Gentleman and all hon. Members that we are working to achieve that.

The right hon. Gentleman mentioned the Public Accounts Committee’s criticisms of the partnership funding scheme. I will make the same point that I made when those were published: we are implementing the recommendations of the Pitt inquiry, rightly instigated by the previous Government. Pitt made 92 recommendations, in a good report. We are implementing its recommendations on partnership funding and the local aspect—the creation of lead local flood authorities—giving local authorities the capacity to take forward flood and coastal erosion risk management. That is working well.

Will we review partnership funding? We are constantly reviewing it; we want to streamline this new concept and get it right, but as I said earlier, it is not for me to dictate whether a local council, a district council or any others provide that added element of the funding. It is wrong to say that we want hard-pressed council tax payers to dig deeper into their pockets. There are various ways in which this funding is found. Yes, sometimes local authorities step up to the mark, but that is by no means always so.

Under the latest capital programme, 22 schemes are going ahead in Devon and Cornwall this coming year, with a total of £5 million grant-in-aid funding during 2012-13, including the construction of improved flood defences in Braunton, Ottery St Mary, St Ives, Stoke Canon, Teignmouth and Truro, and a further 49 projects in Devon and Cornwall have indicative funding for 2013-14 or later, subject to confirmation of the outcomes, cost and partnership funding arrangements.

I recognise that this matter is important to the right hon. Gentleman and his constituents. I have had constructive conversations with colleagues from all parties, many of which have resulted in successful commencement or announcement of schemes, and I assure the right hon. Gentleman that I will continue to work with him to try to achieve a good result for the people of Exeter.

11.29 am

Source document

Local Government - 31 January 2012

31 January 2012

MPs fear for flood defence funding and management

A large ‘mismatch’ exists between flood defence budget and Environment Agency estimates of the costs of maintaining current levels of protection, MPs have concluded.

Members of the Public Accounts Committee claimed that no clear lines of accountability for flood defence were apparent, either, despite this ‘national priority’ costing the country at least £1.1bn annually.

Flooding sandbags picture MPs report the annual cost of flooding is set to rise, and 5.2 million homes are at risk.

The committee based its report on evidence from the Environment Agency and the Department for Environment Food and Rural Affairs. Listed on the Risk Register of Civil Emergencies, the annual cost of flooding is set to rise, and 5.2 million homes are at risk.

In 2009, the EA projected that its flood risk management budget needed to rise by 9% during the spending review period (2011-12 to 2014-15) to sustain current levels of protection in the face of growing risks due to climate change. However, during the same period the Agency’s flood risk management budget has been reduced by over 10%.

DEFRA told MPs that wider efficiency savings would mean capital expenditure on flood defence over the spending review period would be maintained. However, the EA had not yet adjusted its long-term investment strategy and did not know the scale of any long-term funding gap.

Meanwhile, the department continues to find local funding sources for defence, including councils and business. It plans to increase this funding stream from £13M to £43M although no commitments had been secured and pressure continued to mount on local authority coffers.

MPs were also concerned that the department did not accept ‘ultimate responsibility for managing the risk of floods’. Sharing responsibility with the EA and local agencies meant ‘local people do not know clearly where responsibility for decisions lies and which body is answerable when things go wrong’. Local communities needed greater involvement in decision-making processes, too.

‘The annual cost of flood damage is at least £1.1 billion and ageing defences and climate change will increase that bill, so flood protection is a national priority,’ committee chair Margaret Hodge said.

‘Yet it is unclear where the buck stops and who is ultimately responsible for managing the risk of flooding. There is also a great deal of uncertainty about whether there will be enough money to maintain and improve flood protection in the longer term, and who will pay.

‘The Department tells us that it is not ultimately answerable and shares the responsibility with the Environment Agency and local bodies. But the Department has no way of knowing whether local flood management systems are adequate or when it should step in.

‘It is not acceptable that local people should be left in doubt about where responsibility and accountability lie,’ she added.

External link to source

- statement (extracted from Hansard) 17 January 2012

17 Jan 2012 : Column 746W

Floods: Insurance

Mr David Davis: To ask the Secretary of State for Environment, Food and Rural Affairs (1) what progress has been made by the working party formed after the Flood Summit in September 2010; [90277]

(2) what progress has been made on identifying a replacement for the Statement of Principles between the Association of British Insurers and the Government before its expiry. [90432]

Richard Benyon: Since the Statement of Principles was last renewed in 2008, it has always been intended that this would be the last renewal and that the current agreement would expire on 30 June 2013. Following the Flood Summit we held in September 2010, three working groups were set up to look at insurance models for flood risk, improving flood risk data, and property-level resistance and resilience. The groups' findings were published in December 2011.

At the same time, we announced that beyond the expiry of the Statement of Principles in 2013, the Government will continue to invest to reduce the risk of flooding, especially for those households at the highest flood risk and living in the most deprived communities.

A new shared understanding is being developed that sets out more clearly what individual customers can expect from their insurer and from Government. It will reflect the continued responsibility and commitment of Government and insurers to making sure insurance for flood risk remains widely available.

Over the next few months we will consider the case for additional measures to help safeguard the affordability of flood insurance for those groups that might struggle most with premium increases. We plan to make further announcements in the spring.

Source document

Previous item on flood insurance  End of flood insurance subsidy? - (Dec 2011)