Introduction

Figure 1: Uckfield October 2000, Courtesy Alan Thompson, Symonds Group Limited

Around the world, no other natural hazard has claimed more human lives in past decades, ruined more fertile land, or destroyed more houses than flooding . As countries become wealthier, as more people want to live by coasts or rivers, and as we become a more complex and interdependent society, flooding is an increasing menace to our way of life. Climate change will simply accelerate an already fast increasing risk.
The flash floods and landslip problems in Britain in the summer of 2004, were as a result of torrential summer rainfall, indeed in parts of Scotland the total summer rainfall was the highest on record.

Climate change will continue to have serious impacts, and more information is becoming available all the time. For example “Climate Change 2004”, Technical Report Number 2 from the Benfield UCL Hazard Research Centre. There is also an important European Environment Agency Report published in August 2004, which sets out a wide range of climate change impacts.

In most of the world, private insurance companies will not offer flood insurance for householders. Britain used to be the same. Then in 1961, to stave off Tony Benn’s threat to nationalise insurance when the Labour Party next came to power, the British insurance industry voluntarily agreed amongst themselves to guarantee to provide cheap flood insurance for all households and small shops, regardless of where they were situated. This guarantee is unique in the world, indeed in many countries such as Canada and Australia (apart from NW territories), flood insurance for households is simply not available at all, while in others, such as USA, and most of Europe, it is only available to a limited extent .
Latterly, the British flood insurance guarantee has been instrumental in enabling people to obtain mortgages on the increasing number of new houses being built in high-hazard areas such as floodplains or coastal plains. To a large extent the rapid growth in the number of houses being built in high hazard areas could be considered the fault of the voluntary insurance guarantee. If the market had been free to apply prudent underwriting standards, many of these houses would not have been sold because purchasers would not have been able to afford the insurance premium and therefore would not have obtained mortgages. In any event, after forty years of the market distortion caused by the guarantee, insurers find themselves faced with the situation of a large and growing number of houses at risk from flood, as planners and developers have taken the continuing availability of cheap flood insurance for granted.

It could be argued that until the last decade, the insurance guarantee did not really do much harm, because flood mapping was so crude. Indeed until the 1990s, flood mapping had made little progress since the first geology based flood hazard maps were produced by James Croll in 1875 , but in recent years flood hazard mapping has become increasingly sophisticated. Much of this is thanks to more powerful computers and new remote sensing techniques .

The point has now been reached where many insurers have very accurate flood maps down to individual address level (often more detailed than the maps held by the government or its agencies). They are therefore now able to “cherrypick” from the areas that are relatively safe from floods.
The continuation of the flood insurance guarantee was dependent on an informal partnership between the insurance industry and local and national government . Insurers would continue to provide relatively cheap flood insurance as long as government kept some control over developments in flood hazard areas and built adequate defences. In England this partnership has been breaking down as more and more new houses are built in flood hazard areas, often against the advice of the Environment Agency.

If insurers pull out from such areas, would the government nationalise insurance as Tony Benn threatened in 1961? Insurers believe this is unlikely: UK Government has always refused to provide compensation to flood victims. Nick Raynsford, when Minister for Planning, emphasised this point in his evidence to the Select Committee Inquiry into the autumn 2000 floods. When asked if the government would accept flood risks that private insurers would not be prepared to take he said:

“That would not be a wise or sensible position for any government to take.”

Yet governments in the USA, Canada, Australia, and most of Europe do provide compensation to flood victims . Does this mean that UK Government think that almost every government in the developed world is not “wise or sensible”? How does this square with the view that the first duty of government is to protect its citizens?

Still the UK is right up there with countries such as Argentina and Israel, (neither of which are known for flooding problems).
As a report from Middlesex University pointed out , the UK government needs the insurance industry to continue to provide affordable flood cover, as otherwise it would be under pressure to introduce compensation at the taxpayers’ expense.
In 2002, the first insurer to openly refuse cover in flood hazard areas in Britain was “esure”, the telephone and Internet banking insurer. The stated aim of esure was “to ensure that premiums remained competitive for the ‘dry majority’ by excluding flood-risk areas with inadequate defences” .

On 9th July, however, esure announced that it is to begin offering home insurance in some areas of Scotland it had previously declined to cover due to flood risk. Why has it singled out Scotland for such preferential treatment? The answer is that esure has been doing its homework and has found that since Devolution in 1999, Scotland has been actively pursuing much more effective flood risk management policies than England or Wales . One of the aims of this report is to explain in more detail why this was a sensible decision for esure to take, and why other insurers should follow its example.

However, before looking at what has been achieved in Scotland, it would be appropriate to set out the nature and extent of some of the flood problems in England and Wales.