The storms and floods that hit the north of England and Scotland in December 2015 were devastating for those who lived through them. Homes and businesses were destroyed as rising water engulfed towns such as York and Carlisle, leaving residents with a big clean-up job. In some cases this is still going on.
“The same areas flooded this time as in 2005, except that the water stayed longer this time and the severity was worse,” says Neil Gibson, head of loss adjusting at Cunningham Lindsey, a claims manager.
PwC estimates that the storms caused total economic damage of £2.7bn. But only £1.4bn of that was covered by insurance.
People living in the affected areas, and in other flood-prone regions, have long complained that insurance is too expensive. They say that they cannot afford to buy sufficient cover and that excesses — the amount that policyholders must pay before the insurance kicks in — are too high.
So it was timely that just three months after the storms, and following many years of wrangling, a new organisation called Flood Re started to operate in the UK. Its aim is to lower the cost of home insurance for people who live in flood-prone areas, although it does not apply to businesses, or to homes built after 2009.
Under the scheme, homeowners will buy insurance in the usual way, and the insurers will then decide whether to pass the flood risk for specific properties on to Flood Re. The organisation estimates that about 350,000 properties will eventually be involved, although it may take some years to reach that level.
Flood Re is funded partly by a set premium for each property that the insurers place into the scheme. The level of the premium is based on municipal tax bands. It is also funded by a £180m annual levy on the whole industry. The majority of insurers say they will pass that levy directly on to all their policyholders — adding about £10 to the cost of home insurance — meaning Flood Re is regarded by some as a subsidy for people who live in flood-prone areas that is part paid for by people who do not.
We’re already seeing examples of customers being able to access home insurance where previously it would have been very expensive
Insurers have welcomed the scheme. “It is an opportunity to go for business that we couldn’t have gone for before,” says Lindsey Rix, managing director of Aviva’s personal lines business.
She adds that the scheme has had a good start. “We’re already seeing examples of customers being able to access home insurance where previously it would have been very expensive. Lots of people are shopping around [for policies] and the initial signs are very encouraging.”
The company says that, in one example, a customer who was paying a £1,200 premium and a £12,000 excess with a different insurer has now been able to buy cover with Aviva for an £800 premium and a £200 excess.
But Flood Re’s role is not limited to ensuring that prices fall for people buying insurance now.
The scheme is supposed to last only 25 years. The idea is that it also plans for its own demise by creating an environment in which insurance is affordable for everyone without the need for outside intervention.
With that in mind, Flood Re produced a transition plan in February. This laid out how it plans to ensure that there will be no big differences in pricing once it ceases to exist. That partly involves collecting data to analyse the extent and costs of floods. But it also involves encouraging the government and local authorities to do more work to understand the effectiveness of flood defences, and it wants insurers and householders to work together to help bring down claim costs.
Number of properties expected to be eventually involved in Flood Re
That means making more homes resilient to flooding when it happens. “We have to learn to live with water so we need to think about resilience in a different way,” says Mr Gibson of Cunningham Lindsey. “I don’t think that people think much about flood resilience measures.”
These measures, he adds, can include changing the materials used in walls and floors, replacing wooden kitchen units with stainless steel and routeing services such as electricity and telecoms into the properties from above instead of below. However, he adds: “There is a lack of clarity around when a property is and is not resilient, and what the most cost-effective measures to take are.”
Given the scale of the task ahead for Flood Re, it is unsurprising that there is scepticism about whether it can achieve its aims. A paper published in February by the University of Oxford and the London School of Economics said that surface water risks are rising, and argued that “it remains unclear if and how Flood Re will be able to cope with future risks and fulfil its tasks”. For the people still clearing up after last winter’s storms, and fearing what may happen next winter, Flood Re’s ability to prove the doubters wrong will be crucial.
Netherlands: Rivers given more room to meander along path of least resistance to avoid flooding
The North Sea flood of 1953 is still commemorated in the Netherlands, where 1,836 people died and nearly 50,000 properties were damaged or destroyed, writes Esther Gotink. The country, which was already known for its engineering prowess in flood defence, responded by embarking on an elaborate construction project known as Delta Works — making use of dams, dykes, levees, locks, sluices and storm surge barriers.
Now the impact of climate change on river levels has forced the country to rethink its approach to protecting people and property: by sacrificing land so water can flow more freely.
Rising river levels in 1993 and 1995 forced the government to question the effectiveness of its local flood defences. Heightening the dykes, a common practice for centuries, no longer seemed to work. “When rivers break their banks they carry a lot of sand into the floodplains,” says Hans Brouwer of Rijkswaterstaat, the Dutch authority for waterways and public works. “Land on the residential side of dykes is subsiding. This increase in level difference [on either side of the dykes] could cause greater damage if they were to breach.”
It was a turning point in Dutch flood risk management. “It became clear that we needed to start looking at the natural behaviour of rivers,” says Hendrik Havinga, associate professor in river engineering at Delft University of Technology.
The Room for the River project began in 2006 and includes 34 places throughout the country where rivers are allowed space to expand in order to protect more populated areas along the river. The measures include lowering and extending floodplains, relocating dykes and bypasses, and removing obstacles such as bridges and old factories along river banks. “Rivers naturally seek the path of least resistance,” adds Mr Brouwer.
Farmers voluntarily moved uphill, while about 250 residencies close to river banks were evacuated. Even riverside cities such as Nijmegen adapted their urban layout.
The Room for the River project, which was finalised this year, cost €2.3bn. “We experienced some [initial] resistance,” says Mr Brouwer, “but farmers and citizens realised that the proposals helped secure their economic welfare. They’ve given up space so others are safe.”