Flooding: a plain issue

Flooding has rarely been higher on the national news agenda than in the past few months. As the UK emerges from the wettest May to July ever recorded, the issue has everyone's attention. Ministers have been quick to affirm that lessons will be learned and additional flood defence funding made available.

However, as the waters subside, so too could the issue's priority in government eyes if history is any guide. Amplified by climate change and house building in low-lying areas, flooding presents a steadily worsening long-term challenge, and one that demands a sustained and committed long-term response at every level.

The government described the floods of autumn 2000 as 'a wake up call' and remained alert long enough to commit to a significant funding increase for flood defences in the 2002 spending review. After four relatively flood-free years, however, memories had already grown dim. When the 2004 spending review was announced, flood management funding had been frozen.

Meanwhile, despite assurances from the minister responsible, funding for the Environment Agency, whose brief covers identifying and allocating funding for flood prevention measures nationally, has not been increased to allow for inflation. In real terms the agency's budget had been cut, an effect exacerbated by the government's decision last year to cut the EA's budget by £15m.

Investment required

For now, insurers have the government's ear and arguments can be more easily carried, but for how long will this remain the case? The government's newly announced increase in flood defence funding to the EA, from £600m annually today to £800m by 2010, is welcome. But it is vital that we press for answers both in terms of when this increase will become effective (will it rise to £700m or £750m by 2008, say, or will it be left to the last minute?) and on the issue of whether even £800m is adequate for the scale of the challenges we now face.

A recent report from the National Audit Office concluded that around half a million homes and businesses in England are at 'significant risk of flooding', and that the cost of flood repairs to domestic properties can be up to £40,000 for each household. It also found that only 57% of all flood defence systems under the EA's supervision are maintained to target condition and just 46% of high-risk systems meet desired standards. The report, prepared before the recent floods, concluded that if current systems were not adequately maintained we could then be faced with far greater costs for their replacements in 10 or 15 years.

The June and July floods this year suggest that we may already be reaching this crisis point. The EA has already said it needs an additional £150m for maintenance work, and assuming this will be forthcoming, this then raises the question of how that affects the £800m figure previously quoted.

In 2006, an Efra select committee completed a review of the workings of the EA. This followed a consultation process at which Royal and SunAlliance was the sole insurer to give oral evidence. One of the committee's recommendations was that the government should aim to increase the EA's funding for flood defence to £1bn per year 'in the long term.'

In the light of recent events I would argue strongly that this long-term scenario is already upon us. Bearing in mind the current maintenance concerns, it seems clear that this £1bn figure, rather than either £600m or £800m, best reflects the level of investment currently required.

We need information

As insurers we now have increasingly sophisticated flood risk mapping systems that enable us to predict exposures not just for postcode areas but down to the individual address level. Early indications suggest that predictions based on these modelling tools have held up well during the recent floods and storms. However, our models are only as good ultimately as the data on which they are based, and the present extent of our knowledge on the condition and anticipated lifespan of the UK's flood defences is far from ideal.

The recent National Audit Committee report on the EA found significant problems with the agency's flood defence database, which it said was not designed as an asset or work management system and cannot hold data on the maintenance history of each flood defence or clearly link inspection results to maintenance records. The agency was said to be unable to produce an accurate and satisfactory report of system condition, partly due to missing or unavailable data.

It is absolutely vital that high quality data on the location, condition and anticipated life spans of all UK flood defences be compiled and shared with insurers. This applies not only to assets directly operated by the EA but also to those operated by third parties, in relation to which the NAO report notes 'the lack of a clear management policy for dealing with assets owned and managed by third parties.'

If our modelling is based on a particular defence providing one-in-one-hundred-year protection and it turns out that it has not been maintained to this level and proves only 50% effective, this can clearly have a significant impact on how well our model will perform. Understanding when each defence was last inspected and whether it still provides the level of protection it was designed to offer is absolutely vital, not simply so that we can quote individual households and businesses a premium that fairly reflects their level of exposure, but also in terms of anticipating where a small difference could have a massive knock-on effect.

An obvious example of the fine line between disruption and disaster arose in July this year with the narrowly averted loss of Gloucester's Walham power substation. Had this facility been put out of action, a quarter of a million people could have been without power and water for an extended period. The loss of power would have brought everyday life to an effective standstill with no light, no heating and no refrigeration as well as no functioning computers, checkout tills or cash machines.

We also need to know more about the condition of dams and other major water-related engineering works. The feared collapse of the Ulley dam near Rotherham prompted the evacuation of several hundred people back in June. We need to understand whether the condition of other such structures could provoke similar concerns next time flooding occurs in the vicinity.

Under the terms of the Statement of Principles agreed between government and insurers following the floods in 2000, insurers have agreed to continue providing cover to existing policyholders where new or improved flood defences will be put in place within a five-year rolling period. In the interim, of course, we are carrying a higher risk than we would otherwise be comfortable with. The difficulty in practice is that the EA effectively works on 12-month budgets, making it hard for us to understand whether and when the relevant works will actually be undertaken. While recognising that precise planning over a five-year period presents challenges for an organisation with such a complex and wide-ranging brief, we would certainly welcome a dialogue with the agency around how we can form a better understanding of its future plans and priorities.

Balancing needs

There is a growing consensus now that we are likely to see more flash flooding in the UK in future as a result of what has been termed 'tropical storm rainfall'. If what we have seen this summer turns out to be a taster of future weather patterns this could ultimately raise serious questions over the fitness of our entire national drainage infrastructure. The cost of the wholesale re-engineering that might ultimately be required to replicate the kind of drainage systems seen in other countries more usually prone to sudden massive downpours would be enormous. This makes it all the more important that we do everything we can to limit the strain on our drainage infrastructure.

In this context the recent announcement that the UK needs another three million homes, and that a significant proportion of these will have to be built on flood plains, seems untimely to say the least. From an insurer's point of view, situating conventional residential developments on a flood plain can never be the right thing to do. As a nation we need to think carefully about what the longer-term consequences of large-scale house building on low-lying land will be. Once these properties have been built and the land concreted over, residents will naturally want to insure their homes. Realistically, though, there comes a point at which the cost of doing so could become unfeasible for all parties concerned, and I believe brokers have an important role to play here in helping home and business owners to understand the true level of risk they face in flood-prone areas.

Ordinary members of the public need to pressure their MPs to oppose the kind of house building projects we have seen recently where local knowledge clearly indicates it is not a question of whether but when serious flooding will occur. Part of the motivation for doing so should come from the realisation that such developments put other nearby properties at greater risk by diminishing the land's capacity to accommodate and absorb flood waters.

There has been a lot of talk recently about implementing flood resilience measures. Without wanting to suggest that individual provision should be seen as a substitute for central planning and funding, there is clearly a role for this, as seen in the Flood Resilient Homes factsheet on the website of the Association of British Insurers. For instance, specially designed door and airbrick covers can provide a good first line of defence against flash flooding.

Owners of flood-damaged properties may well wish to consider including more serious flood resilience measures when repairing their properties, but they need to understand that the additional costs are not covered by insurance that is explicitly intended to provide like-for-like replacement. However, where effective measures have been undertaken the extent of damage in any future flood should be less, with a reduction in trauma and disruption for property owners.

Plan for change

Clearly, flooding is a significant threat in the long term. Exactly how the picture will pan out remains to be seen. Will the current government commitments to increased flood defence spending be kept up and built upon, or will things drift again? Climate change, no longer the controversial topic it once was, looks certain to play a role. As recent events in Yorkshire and Gloucestershire so graphically illustrated, we must all learn to expect, and plan for, the unexpected.

However sophisticated our modelling becomes, sudden torrential rainfall will always remain unpredictable, but wherever effects of flooding can be anticipated and managed, we owe it to ourselves as a country to take all possible steps to guard against the threat of future flooding.

- Alan Gairnes, head of property underwriting, Royal and SunAlliance UK and More Than.