HOW SHOULD SOCIETY CHOOSE WHERE TO DIRECT FLOOD RESOURCES? - PHILIPPA KING, LCP IFOA FLOOD WORKING PARTY
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How should society choose where to direct flood resources? Philippa King, LCP IFoA Flood Working Party 25 May 2016
Overview
Impact of flood
Flood defences
The insurance industry
Outlook
25 May 2016 2
Impact of flood 25 May 2016 3
Impact of flood 25 May 2016 4
Impact of flood 25 May 2016 5
Impact of flood 25 May 2016 6
Impact of Flood: Europe 2000 - 2016
268
>1m
>€62bn
1296
30%
http://ec.europa.eu/environment/water/flood_risk/impacts.htm, http://floodobservatory.colorado.edu/Archives/index.html,
25 May 2016 Increasing stress on disaster-risk finance due to large floods, Nature Climate Change, 2014. 7
Impact of Flood UK: Christmas 2015
22,000 £1.5bn
>3,600
£5bn £50k
https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Flooding/Flooding-in-numbers
25 May 2016 http://www.independent.co.uk/news/uk/uk-flooding-budget-cuts-intensified-impacts-of-floods-a6788886.html 8
How do we get it right? 25 May 2016 9
The insurance industry 25 May 2016
Flood insurance obligations
upenn.maps.arcgis.com/apps/MapSeries/?appid=4fa76ed45f9f4ee5a5995c0ea7aef6f3
25 May 2016 11Flood policies single vs bundled
upenn.maps.arcgis.com/apps/MapSeries/?appid=4fa76ed45f9f4ee5a5995c0ea7aef6f3
25 May 2016 12Government in flood insurance
upenn.maps.arcgis.com/apps/MapSeries/?appid=4fa76ed45f9f4ee5a5995c0ea7aef6f3
25 May 2016 13What is Flood Re?
Homes built Commercial
Buy to lets
after 2009 properties
25 May 2016 14How does Flood Re work?
Low flood
risk homes
Premiums
Flood Re
Premiums Claims
Levy Home
Flood Re
insurers
Flood Re Premiums
Claims
Claims
High flood
risk homes
High risk homes: 1-2% highest risk, ~350,000
25 May 2016 15How does Flood Re work?
Council tax band
Policy type
Flood Re
Premiums
Levy Home
Flood Re
insurers
Levy I: £180m
Levy II…
High risk homes: 1-2% highest risk, ~350,000
25 May 2016 16Flood Re considerations Strengths Issues Consumer benefits Scope Infrastructure Cost Further reach Operational 25 May 2016 17
Flood Defences 25 May 2016
Flood defence and response methods
house defences emergency services
alternative
(not) dredging rivers (?) accommodation
protective
clothing boats
Flood Flood inflatables
vegetation
Prevention response
equipment
barriers
resilient
sea walls repairs ropes animal
cages
water gate evaluating lessons
self-closing
barriers learned
insurance
https://www.gov.uk/government/publications/2010-to-2015-government-policy-flooding-and-coastal-change/2010-to-2015-
25 May 2016 government-policy-flooding-and-coastal-change 19
https://www.gov.uk/government/publications/flood-rescue-concept-of-operationsCase study: Thames flooding
• Option 1: Divert
water from river
in times of flood
• Option 2: Flood
proof homes
25 May 2016 20Cost-benefit analysis – divert water
Cost Benefit Total
Scheme £100m Selling minerals from £5m - £155m
Transport disruption £10m dredging
Maintenance £50m
Commercial £80m + £80m
properties protected
£5m Parks, boating facilities, - £5m
wildlife reserves, fish + social
Downstream flooding £160m Four floods prevented £200m + £60m
(affects 20,000 people) Property values
Reduced property £30m increase £50m
values
£355m £335 + social - £20m
+ social
Assumptions: Costing over 65 years
Scheme prevents 4 major floods in that time
http://geography.org.uk/resources/flooding/2014ukfloods/
25 May 2016 21Cost-benefit analysis – flood proof homes
Cost Benefit Total
3,000 homes
£20,000 per home £60m - £60m
Continued flooding 70% reduction of £140m + £140m
Displacement repair costs - social
Clean up
£60m £140 + £80m
- social
Assumptions: Assumes 4 major floods over 65 years
Ignores downstream homes
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/411182/Cost_estimation_for_household
25 May 2016 _flood_resistance_and_resilience_measures.pdf 22Decision time…
• Option 1: Divert river
– £160m cost to
government
– £20m net cost +
social benefit
• Option 2: Flood proof
homes
– £60m cost to
government
– £80m net benefit +
social cost
http://www.bbc.co.uk/news/uk-england-berkshire-25727040
25 May 2016 https://www.gov.uk/government/publications/jubilee-river-flood-alleviation-scheme/jubilee-river-flood-alleviation-scheme 23Decision time…
• Option 1: Divert river
– £160m cost to
government
– £20m net cost +
social benefit
Actual benefit:
£230m
Cost of extension:
£256m
http://www.bbc.co.uk/news/uk-england-berkshire-25727040
25 May 2016 https://www.gov.uk/government/publications/jubilee-river-flood-alleviation-scheme/jubilee-river-flood-alleviation-scheme 24Limited resources
• 8 to 1 requirement for return on flood spending
£66m
£12m
£90.2m
£190m
£100m
http://www.theguardian.com/environment/2014/feb/13/floods-david-cameron-spending-pledge-treasury-defra
25 May 2016 25Flood Defences – EU directive
2011 2013 2015 2016
Preliminary flood
risk assessment
Flood risk maps
for these zones
Flood risk management
plans:
Prevention, protection and
preparedness
Overview report based
on members’ flood risk
management plans
http://ec.europa.eu/environment/water/flood_risk/
25 May 2016 26Netherlands
• Ten of billions of euros over 40 years
• €1bn per year maintenance
http://www.itv.com/news/2016-01-05/dutch-flood-defences-show-what-can-be-achieved-with-investment/
25 May 2016 http://www.theguardian.com/environment/2014/may/19/floods-dutch-britain-netherlands-climatechange 27Netherlands
• Ten of billions of euros over 40 years
• €1bn per year maintenance
http://www.itv.com/news/2016-01-05/dutch-flood-defences-show-what-can-be-achieved-with-investment/
25 May 2016 http://www.theguardian.com/environment/2014/may/19/floods-dutch-britain-netherlands-climatechange 28Outlook 25 May 2016
Funding increase
• Budget 2016 – IPT increased from 9.5% to 10%
www.gov.uk
25 May 2016 30National flood resilience review
Resilience of
Modelling
infrastructure
Temporary Investment
defences strategy
https://www.gov.uk/government/news/national-flood-resilience-review-government-action-to-tackle-floods
25 May 2016 31Flood Re transition plan
http://www.floodre.co.uk/industry/how-it-works-transition-plan
25 May 2016 32Shhhhhh (climate change) 25 May 2016 33
Questions Comments The views expressed in this presentation are those of invited contributors and not necessarily those of the IFoA. The IFoA do not endorse any of the views stated, nor any claims or representations made in this presentation and accept no responsibility or liability to any person for loss or damage suffered as a consequence of their placing reliance upon any view, claim or representation made in this presentation. The information and expressions of opinion contained in this publication are not intended to be a comprehensive study, nor to provide actuarial advice or advice of any nature and should not be treated as a substitute for specific advice concerning individual situations. On no account may any part of this presentation be reproduced without the written permission of the IFoA. 25 May 2016 34
Premium by council tax band
Property Council Tax Band
Cover
A B C D E F G H
Type
Wales: A/B/C D E F G H I
Buildings only £132 £132 £148 £168 £199 £260 £334 £800
Contents only £78 £78 £98 £108 £131 £148 £206 £400
Buildings and
£210 £210 £246 £276 £330 £408 £540 £1,200
Contents combined
25 May 2016 35How to flood protect a home • Flood-proof doors £750 – 2,500+ (or demountable door guards £2,380) • Airbrick covers £180 – 1,680 • Resilient plaster £6,300 – 8,200 • Concrete/sealed floors £7,600 – 12,500 • Raise appliances £700 – 1,100 • Periphery wall/free standing barriers £5,000 - 12,000 • Additional external layer (render, bricks etc) £2,500 – 4,000 per property • Automatic door guards £8,000 • Sump and pump £50 – 2,500 • Raise floor levels £28,200 – 44,700 25 May 2016 36
How to flood protect a home 25 May 2016 37
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