A soggy litany

The launch of Flood Re has been preceded by yet another winter of record rainfall and widespread flooding. Graham Buck reviews the impact of a series of storms over three months

Last autumn the Met Office invited the public to suggest names for the storms of the forthcoming winter season. Little did we know that the resulting quartet – Desmond, Eva, Frank, Imogen – were to go on to wreak the most havoc since storm Abigail hit the United Kingdom in November.

Winter 2015-16 saw a relentless succession of heavy rainstorms, high winds and floods, leaving at least 660 of the country’s flood defences in need of repair work according to the Environment Agency. Even the Thames Barrier was not enough to prevent London’s flood defences being stretched in February, when the river overflowed its banks in several stretches.

The repair bill countrywide resulting from storm and flood damage from December to February is estimated at more than £5bn, with the Association of British Insurers (ABI) pencilling in a figure of £1.5bn for resulting claims since the Met Office issued its first red severe weather warning of the season on December 5. While half the total of £3bn paid out during the summer floods of 2007, the typical payout for a domestic flood claim this winter has been a hefty £50,000; a sharp increase from the average of £31,000 in the 2013-14 rainstorms.

“Insurers have been progressing more than 15,000 property claims and assisted more than 3,000 families, placing them in alternative accommodation whilst repairs are made to their home, while also helping businesses get back on their feet as quickly as possible,” says Anne Mirkovic, communications and public affairs assistant at the ABI.

“A small army of insurers were on the ground in cities and rural communities right across the UK, helping families and businesses that had been affected by the floods.”

For some unfortunate property owners and businesses, this winter was not the first time they had submitted a claim for flood or storm damage. The city of Carlisle, which stands on the flood plain of the river Eden where it meets with the Pettereril and Caldew, is particularly vulnerable. In January 2005, over 1,800 properties flooded and damage was estimated at £400m. Little more than a decade on, Carlisle bore the brunt of storm Desmond and nearly 2,000 properties were affected.

Possibly stung by accusations that government has relaxed efforts to strengthen in recent years to strengthen the UK’s flood defences but finds money for transport infrastructure projects, chancellor George Osborne announced shortly after Desmond struck in December that funding of at least £2.3bn would be provided over the next six years on flood protection.

Osborne also promised a £50m repair and renew scheme for Cumbria and Lancashire, to be administered by local authorities rather than centrally administered. The scheme provides homeowners affected by Desmond with £500 for temporary accommodation and up to £5,000 to protect their property against future flooding. Flooded businesses were offered up to £2,500 to help their efforts to resume trading.

Pooling resources

Despite its insistence that the country must continue living with an austerity budget in the years ahead, government ministers have been under pressure to beef up flood defence spending after two winters of record rainfall levels in three years. There is already a common perception that since the turn of the century both the regularity and severity of rainstorms in the UK have increased and the response of both politicians and the insurance industry has been found wanting.

“Flood seems set to become a more regular occurrence in almost any part of the country – most recently with the Somerset levels in 2013, the Thames flood in 2012/2014 and the North of England and Scotland in 2015,” says Julia Graham, technical director at Airmic.

“It’s our perception that little 'committed spending' has been achieved, with the government apparently ramping up their response in more recent years following the Thames and Somerset levels flooding. The media taking a keener interest in this issue might also elevate the subject on the agenda.”

Graham adds that what government funding has been provided tends to be allocated to detailed surveys on how to alleviate flooding, and would be better invested in simple risk management measures such as dredging and keeping waterways clear. Mike Jones, chief operating officer for UK and Ireland at claims management company Crawford & Company reports that public bodies have at least recognised the importance of preventative measures and shown efficiency In keeping culverts clear and ensuring that drainage channels are kept clear of leaves and other debris.

Opinion in Carlisle held that the damage in December could have been even greater, had defences not been improved in the wake of the 2005 floods, says Jones. However, as he points out “defences divert water and in a highly populated area it may simply redirect the flooding.

“In building a comprehensive defence, a whole list of priorities need to be considered, including construction issues. So on this occasion, the defences made a difference but ultimately were overwhelmed by the sheer volume of water.” He agrees that preventative measures to mitigate future flood risk, such as planting more trees to help soak up excess water, are sensible but only when part of an integrated plan.

Firms such as Crawford have a well-drilled procedure in place to respond to flood incidents, which 10 or 15 years ago tended to be more sporadic than now. “We are better organised and have good connections to the supply chain,” says Jones. “This includes a highly organised approach to stripping out and drying damaged properties. Speed drying is now more widely used, although it’s also recognised that it is not always suited to every type of property.”

Where a number of properties in a locality share the same insurer, a designated contractor can be hired to undertake repairs for all. Set-up costs are reduced by being spread more widely and repairs can be completed more quickly as resources are deployed more efficiently.

Another change, noted by Sam Dawson, commercial sales director for Belfor UK, is the more proactive attitude adopted by those impacted by flooding. Loss adjustment firms respond promptly, but can find that customers have already taken the first vital steps to investigate the damage and instigate recovery. “Commercial businesses understand risk and how to deal with it much better, which helps them to recover more quickly,” he says.

“Our advice to customers is always the sooner we can get on site to prevent or minimise secondary damage, the better. Machinery and electronics can be dried and stabilised to reduce the risk of corrosion.”

Flaws in Flood Re?

Another difference this winter has been that loss adjustment teams are often quizzed about the new Flood Re scheme to be launched in April – particularly how coverage and premiums will be affected.

The ABI’s Mirkovic describes the scheme as “a world first, helping to create a competitive insurance market for high flood risk homes in UK and providing access to affordable flood insurance for hundreds of thousands of households once it reaches capacity.”

Flood Re will help maintain cover for the one to two per cent of homes across the UK deemed at greatest risk of flooding – up to 350,000 properties in all – and will be funded via a levy on all home insurance policies estimated to work out at £10.50 per policyholder. Inevitably the funding has attracted controversy, with suggestions that the scheme will subsidise many affluent homeowners in expensive riverside properties.

The Federation of Small Businesses (FSB) wants Flood Re’s remit extended to its members. It claims that up to 75,000 smaller businesses in areas at risk find it hard to access affordable flood insurance and 50,000 have been declined. In response, the British Insurance Brokers’ Association (BIBA) has said that it will aim to develop a flood insurance scheme for small to medium-sized businesses in exposed areas.

Graham says that as Airmic represents larger buyers of property insurance, it was not involved in the discussions that led to Flood Re’s formation. “However we question the limited scale, when the impact of flood affects everybody – householders, small business and large businesses, which often rely on the small businesses, and the impact on the economy is throughout those groups.

“We believe that the lack of input from the business community into Flood Re has led to a complex model with severely delayed implementation of the scheme.”

It has also been suggested that businesses hit on more than one occasion by flood losses might now be considering relocating somewhere less vulnerable, but Jones notes that this isn’t always an option for those serving the local community. Other factors may prevent a move; lease terms could mean that relocating is not feasible or it may not prove possible to sell a property in an exposed area for an economic price. “The people I’ve encountered in recent weeks are very stoic – often unbelievably so – and many remain committed to living and working in the area,” he reports.

This article was published in the March 2016 issue of CIR Magazine.

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