Homeowners’ deal doesn’t take into account the increasing risk from rising sea and shifts in rainfall due to climate change
With insurers receiving thousands of claims for flood damage caused to homes over the past few weeks, there are worrying signs that the Department for Environment, Food and Rural Affairs is failing, under the stewardship of its Secretary of State, Owen Paterson, to take account properly of the implications of climate change for a new flood insurance scheme.
Much of the recent flooding has been triggered by heavy rainfall, with last month being the sixth wettest December in the UK since records began in 1910.
Some households are making their second insurance claim in two years after extensive flooding in 2012, the UK’s second wettest year on record, which, according to the Environment Agency, cost the economy £600 million.
Met Office data shows that four of the five wettest years in the UK have all occurred since 2000. Long-term averages of 30-year periods show an increase in annual rainfall of about 5% between 1961-1990 and 1981-2010. In addition, a preliminary analysis by the Met Office also indicates that 1-in-100-day extreme rainfall events have become more frequent since 1960.
In addition, global sea level is also rising by more than 3cm every decade, and poses a particular problem for coastal properties in south-east England where the Earth’s crust is slowly sinking.
So a combination of increased rainfall and rising sea level is clearly increasing the risk of flooding, and raising costs for both homeowners and insurers.
At present, insurance for properties at high risk of flooding is implicitly subsidised through higher premiums for all policy-holders. However, insurance companies have warned successive Governments over the past few years that the rise in the number of properties at risk of flooding has pushed the existing arrangement to breaking point.
In June 2013, Defra initiated a consultation about a proposal for a new scheme, called Flood Re, to provide cover for high-risk properties, paid for through an explicit levy on all policy-holders’ premiums.
Defra’s original proposal was accompanied by an Impact Assessment which stated that Flood Re would cover about 500,000 homes, and to pay future claims, £180 million each year would need to be raised through a levy of about £10 on all policy-holders’ premiums.
But the Grantham Research Institute on Climate Change and the Environment pointed out in its response to the consultation that the Impact Assessment for Flood Re, which the Government expects will operate for between 20 and 25 years from 2015, had failed to take into account any increase in flood risk through rising sea levels and shifts in rainfall due to climate change.
The Institute highlighted the Climate Change Risk Assessment, published by Defra in January 2012, which concluded that the number of residential properties in England and Wales exposed to a significant risk of coastal or river flooding could increase from 370,000 in 2008 to between 450,000 and 800,000 by the 2020s, even when assuming no new buildings.
In early November last year, Defra appeared to acknowledge this serious mistake and promised to publish a revised clause to be added to the Water Bill and an updated Impact Assessment which “has taken account of the consultation responses, notably in terms of developing the analysis of transition to a free market, the potential impacts of climate change, impacts on property values and the costs of the options”.
However, its revised Impact Assessment, published on 29 November, simply dismissed, with a single statement, the potentially substantial rise in the number of homes at risk due to the impacts of climate change:
The significant uncertainties in these factors, the relatively short term transitional nature of measures being considered and the Environment Agency Long Term Investment Strategy whose aim is to match the lower climate change scenario suggest that the assumption of no change in flood risk is a reasonable one for comparing options against the baseline scenario.
Hence, Defra has assumed that new and enhanced flood defences will prevent the risk to any additional homes from becoming significant, and that its original calculations, which ignored climate change, require no modification at all.
But last July, the House of Commons Select Committee on Environment Food and Rural Affairs warned that “funding has not kept pace in recent years with an increased risk of flooding from more frequent severe weather events and the relatively modest additional sums to be provided up to 2020 will not be sufficient to plug the funding gap”.
This shows that Defra is unable or unwilling to perform the serious analysis needed to ensure that its plans for Flood Re are robust.
It also provides further evidence that Defra has been failing, since the appointment of Owen Paterson as Secretary of State for Environment, Food and Rural Affairs in September 2012, to ensure that the UK adapts and becomes more resilient to the impacts of climate change, particularly flooding.