Executive Summary

Flood insurance in Britain is going to become harder to obtain in the future. An agreement by insurers to provide household flood insurance at a reasonable cost anywhere in Britain expired at the end of 2002, and already many insurers are not offering cover for new business. The stated reasons for this agreement being discontinued are the lack of adequate planning controls and a lack of adequate spending on flood defences. These reasons have caused some surprise in Scotland, where since Devolution in 1999, planning controls have been tightened up by most local planning authorities to limit any building in the floodplain, and spending on flood defences has risen dramatically.

The insurance industry as a whole has mainly been concentrating on lobbying central Government to spend more money on flood defences in England and Wales, a tactic that has only been partially successful so far. Perhaps this is because flood defence spending has to compete with many other, arguably more deserving, calls on the public purse.

Since 1995, the author has been concentrating on non-structural measures, such as planning controls and sustainable drainage. He hopes to show that this non-structural approach has been particularly successful in Scotland. Many experts around the world now see non-structural measures as being a more sustainable, efficient way ahead, tackling the problem rather than relieving the symptoms. For example, years of regular face to face meetings at a local level have given the author the opportunity to influence planning strategies for all the main population centres in Scotland. Current planning strategies for most of these communities now presume against allowing any new housing development where the flood risk exceeds the 200-year return period. In addition, differences in legislation in Scotland have resulted in preparations being made for a test case for insurers to recover up to £70m in claims payments from a local authority in Scotland. If successful, it could have important implications for the flood insurance risk north of the Border.

The author’s confidential discussions with the senior underwriting managers of many of the leading insurance companies indicate that there is a very low awareness in the British insurance industry of what has been achieved in Scotland and he hopes that this report will help to remedy that situation. While the solutions are working well in Scotland, it may already be too late for the South East of England, where some radical measures may be required in the future. Some of these measures are listed in the future outlook section at the end of this report.