MFR0003

Written evidence submitted by Flood Re

Executive Summary

• The financial and emotional impact of flooding can be devastating for families and communities. After three relatively dry years, 2019/20 saw the first major Storms, Ciara and Dennis, causing widespread flooding across the UK. Between November 2019 and February 2020, thousands of homes were flooded in South Wales, Northern and Central England and the Scottish Borders.
• The Environment Agency (EA) estimates that 5.2 million homes and businesses in England are at risk of flooding and that around 700 properties are vulnerable to coastal erosion over the next 20 years. This year highlighted that the risk of flooding in the UK is ever increasing.
• Climate change will increase the frequency and severity of flooding across the world. By the 2050s, annual losses in the UK from flooding are expected to increase by between 25% and 80% depending on whether global temperatures warm by 2°C or 4°C. This is the case even with continued investment in flood defences at current levels, underlining the need for further adaptation measures to protect homes from flooding.
• We have seen the importance of the Flood Re Scheme and demonstrated it working successfully as planned and designed. During the past financial year, the number of policies backed by Flood Re increased to almost 200,000, a rise of 20% over 2018/19. More than 300,000 properties have benefitted from the Scheme since its launch in April 2016. It has provided financial protection and peace of mind to those whose homes and lives are at risk of flooding.
• Flood Re understands that Government needs to do more to maximise the UK’s flood resilience and protect more homes. This submission covers details the different areas that Flood Re believes the Government could go further to ensure this can happen:

• Increasing the take up of property flood resilience measures;
• Implementing Flood Re’s Quinquennial Review proposals;
• Extending the Green Homes Grant to include property flood resilience;
• Introducing Flood Performance Certificates;
• Reforming planning policy to ensure sustainable development that does not increase flood risks;
• Investing in new flood defences;
• Ensuring adequate investment for maintenance of existing flood defences.

The UK Government’s policy statement on flooding, published in July, is a step in the right direction to protect householders from flooding and is a movement towards achieving a more resilient housing stock across the country. Through implementing the recommendations above, the Government could increase the number of homes that are protected from the damages caused by flooding.

About Flood Re

• Flood Re is a joint initiative between the insurance industry and the UK Government. It was established by the Water Act 2014, launched in 2016, and will run until 2039.

• Its purpose is to promote and enable the availability and affordability of flood insurance for eligible homes and manage over its lifetime the transition to an affordable market for household flood insurance where prices reflect the risks of flooding.

• More than 300,000 households have been backed by the scheme since it was launched. Independent research shows that 98 per cent of households with prior flood claims can now obtain quotes from five or more insurers, when none could get five quotes before the creation of Flood Re. Furthermore, 4 out of 5 households with previous flood claims saw a price reduction of more than 50 per cent.

• In July 2018, Flood Re published its Transition Plan[1] which sets out a strategic plan to work with the insurance industry and policymakers to manage our exit from the market by 2039. Our first Quinquennial Review (QQR) was published in 2019[2] and included proposals to help incentivise the take-up of property level flood resilience measures by householders, encourage the growth of the resilience products sector and reduce the costs and disruption of future flooding when it occurs.

• Flood Re supports the PAC’s inquiry into managing flood risks as this provides an opportunity to consider how to best manage the risk of inland flooding. This submission is informed by our Quinquennial Review (QQR), Transition Plan, and associated research.

Increasing the take up of property flood resilience measures

1. Effective flood risk management by Government is needed to reduce the frequency and severity of flooding. Householders need to act to make their homes and communities more resilient, reduce the risk of flooding and the costs of repair. The insurance industry needs to ensure that customers are informed and suitable products are available.

2. To protect more homes from flooding there needs to be a significant and rapid increase in the installation of property flood resilience (PFR) products. This is the installation of resistant or resilient measures to provide enhanced protection to reduce the future risk of, or damage caused by, flooding to a property.

3. Measures such as barriers, flood doors and airbricks have been identified as a key solution in reducing the costs of repair and recovery time of affected properties and to reduce the misery and disruption caused by flooding to both families and businesses.

4. The Government’s recent flooding policy statement made clear that more must be done to accelerate the uptake of PFR as well as ensuring flood management strategies are resilient to future climate change.

5. Flood Re commissioned the University of the West of England (UWE) [3] to look at the financial viability of PFR, including both post-flood repair and proactive resilience intervention. The report concluded that PFR measures are beneficial and cost-effective and play an important role in flood risk management.

6. The National Flood Resilience Review[4] concluded that installing PFR measures is a cost-effective way of limiting flood risk and reducing the cost of repair, thereby reducing insurance premiums.

7. The Property Flood Resilience Roundtable published a Code of Practice (CoP), which sets a clear benchmark for adapting buildings to be flood resilient using six key standards:
1. an assessment of the likely severity and hazard to a building;
2. a flood survey of the property;
3. recommendations and options to build-in better flood resilience;
4. surety the design and construction can work as promised;
5. upon completion the operator in the home or business has the necessary knowledge to deploy systems effectively; and
6. surety this can be operated and maintained to have the promised effect.

8. Supporting (and where possible mandating) the recently published resilience roundtable’s Code of Practice can help to enable the uptake of PFR.

9. Current government-backed grants have been offered to encourage take up of resistance and resilience measures by those whose homes have been damaged. While these types of grants can increase uptake of PFR measures, there is no ability for households to do this proactively.

10. Incentivising PFR measures for householders can help with increasing take up. This could be through better grant schemes, Flood Re’s Quinquennial Review proposals or introducing Flood Performance Certificates to educate householders about the benefits of PFR.

Flood Re’s Quinquennial Review

11. Flood Re welcomes the Government’s support for specific changes to the Flood Re Scheme, as proposed in Flood Re’s Quinquennial Review (QQR).

12. Our QQR proposals will help homes and communities across the UK be better prepared so that they can respond and recover more quickly to flooding in the future. By implementing the proposals, UK Government can look to protect more homes from the risk of flooding.

13. One proposal, to ‘Build Back Better’ refers to the process of carrying out a more resistant and/or resilient repair to flooded homes. This enables changes to the Scheme to permit the payment of claims to include an additional amount for resilient or resistant repair beyond the original damage.

14. Another proposal ‘Discounted premiums’, helps to recognise and reward those householders who have proactively adapted to be more resilient and resistant to future flooding.

15. Build Back Better and Discounted Premiums will accelerate the uptake of PFR and therefore we are keen to bring these proposed changes to the market as soon as possible so hard-pressed householders at highest risk of flooding can start to benefit. 

16. Government should implement the proposals as soon as possible to permit Flood Re to support flooded homes to Build Back Better and introduce discounted premiums.

Extension of the Green Homes Grant

17. Flood Re has welcomed the introduction of the Green Homes Grant and agrees that it can play a vital part in the Green Recovery plan that will help boost the economy, protect and create jobs while also cutting carbon emissions and saving people money.

18. However, we believe there is an opportunity to extend this initiative to include help for householders to install property flood resilience measures, creating a more inclusive grant scheme and incentivising people to take action.

19. An extension of the Green Homes Grant could incentivise householders to install PFR measures and support the Government’s recently announced policy statement and climate change objectives. Moreover, an extension of the grant has the potential to help people protect their homes from one of the most severe impacts of climate change – increased flooding.

20. Extending the Green Homes Grant can be the catalyst for improving the sector and embedding robust accreditation schemes that would build confidence for consumers to install these products.
21. This is a simple but effective way of building a more resilient housing stock across the country – authorising this change to the scheme is also completely aligned with the Government’s climate change objectives.

Flood Performance Certificates

22. Flood Re’s Transition Plan highlighted the potential use of Flood Performance Certificates (FPCs) by households at risk of flooding.

23. FPCs have the potential to be a crucial policy intervention to support a widespread and relatively rapid increase in the installation of property flood resilience (PFR) measures. They can be central to realising the Government’s long-term objectives of creating a more resilient UK housing stock.

24. If mandated at the point of sale and rent, FPCs can be an essential tool to communicate the standards set out in the Code of Practice in an accessible and usable format to householders, insurers and others. They can also help to drive forward Flood Re’s key QQR proposals – Build Back Better and Discounted Premiums

25. Flood Re believes FPCs will act as the catalyst for increased uptake of PFR through providing relevant and actionable information for householders by:
1. setting out the level of risk and demonstrating what could be done;
2. addressing concerns about blight by highlighting positive adaptation to flood risk; and
3. establishing a consistent benchmark to encourage take up of PFR – such as Government grants and incentives as well as discounted premiums from insurers.
26. An FPC would provide a rating, which would reflect the risk of flooding to a property and the implications should a flood occur (i.e. likely time spent displaced from the home).  The certificate would make recommendations for uptake of the most effective property flood resilience measures.

27. Flood Re believes information held on an FPC would be similar to that in an Energy Performance Certificate, with indicative costs and information on registered and accredited PFR installation organisations. This could incentivise householders to take action to improve the resilience of their property and unlock savings.

28. Introducing FPCs would also complement the Government’s backing of Flood Re’s QQR proposal to allow discounted premiums that recognises and rewards householders who have proactively adapted to be more resilient and resistant to future flooding.

29. Helping householders understand what action needs to be taken can act as a catalyst for the uptake of PFR and help improve property resilience.

Planning Policy

30. There is a pressing need to develop more housing to meet existing and growing demand. However, development also needs to be sustainable so that it does not increase local flood risks if the insurance market is to Transition to affordable risk reflective pricing by 2039.

31. The impact of new housing developments can be significant. In England alone, 347,000 planning applications were granted in 2019, 6,000 of which were for ‘major’ residential developments[5]. There are an additional one million unbuilt homes that have planning permission in the pipeline, according to the Local Government Association.[6]

32. 99.4% of planning applications were granted in line with EA flood risk advice in 2019. However, the EA does not have responsibility for surface water flooding so there are concerns about development impacts in dense urban areas in particular (where surface water flood risk dominates).

33. There are concerns there is an inconsistent approach towards climate risk in the planning review process, and that Local Authorities lack skills and support to take a long-term view.

34. Given these limitations, there should be a joint compliance check by local authorities and the Environment Agency to ensure planning policy guidance is adhered to. This would provide greater transparency around planning decisions and lead to better outcomes.

35. Current planning practice guidance allows developers to build properties in a flood risk area as long as there is space for flood defence measures to be installed in the future. As a result, there is currently a systematic disconnect between those who financially benefit from a new development – the developers – and those who face the consequences of it not being sustainable or insurable.

36. Government should consider how those who benefit from a new development are held to account for its longer-term insurability, so they will be incentivised to ensure it is insurable.

37. When Flood Re was established in 2016, properties built after 2009 were deliberately excluded from the Scheme to avoid incentivising inappropriate development in areas prone to flooding. Amending the condition now would not only be inconsistent with planning policy and the commitments made by Government in 2008 but create incentives for inappropriate development.

Flood Defences

38. Flood Re recognises the strategic challenge posed by climate change to both parts of its founding purpose; promoting the availability and affordability of flood insurance for eligible homes; and managing over its lifetime the transition to an affordable risk reflective insurance market.

39. There is growing recognition generally and in the Insurance industry specifically of the increasing hazard from inland flooding and sea level rise along with greater exposure due to climate change. This, coupled with new property developments, creates concerns about increasing risk of surface water flooding. This has the potential to affect insurers’ appetites for flood risk and the global reinsurance markets’ ability to take on these risks.

40. Surface water flooding often results from overflowing drainage and sewerage pipes, maintained in a fragmented way across several organisations (e.g., water companies, local authorities). Infrastructure management plans are not well joined up and do not always make best use of green infrastructure and sustainable drainage systems.

41. The Government should bring forward strong national adaptation responses to mitigate against a rapid increasing flood risk that will threaten the viability of communities situated in areas at the highest levels of risk. To fail to do so may threaten Flood Re’s transition out of the insurance market in 2039.

42. As outlined in our Transition Plan, limiting the risks of flooding requires continued investment in flood risk management, including flood defences. Investment in flood defences is essential as part of a national effort to adapt to the impacts of climate change.

43. Flood defences are crucial in reducing the risk of flooding across the UK. Flood Re welcomed the UK Government’s announcement in July to increase funding for flood defences to £5.2bn over the next six years, but the policy statement alone will not reduce the risk of flooding.

44. Research commissioned by Flood Re found that £1.1 billion a year of flood damage is prevented by the UK’s current network of river barriers and defences[7], demonstrating why previous investment in flood defences was value for money.

45. Recent Government spending announcements on flood defences are welcome. However, the Government’s commitment to investment in new defences and the maintenance of existing defences must provide more long-term clarity and certainty, with funding spanning a rolling 10- or 20-year period. 

Flood Defence Maintenance

46. Flood defences are a crucial part of reducing the risk of flooding across the UK. However, if current defences are not maintained, then their performance is likely to reduce over time. Flood defences will be ‘overtopped’ more frequently and fail to prevent flood waters reaching people’s homes.

47. Maintenance spend takes many forms, including grass cutting, channel clearing, carrying out structural surveys and operating telemetry systems.

48. Between 2010 and 2014, maintenance was generally undertaken at a “minimum level” for all but the most significant assets. As a result, in order to repair the damage from the 2013/14 winter floods, an extra £270 million had to be made available to cover the shortfall.

49. Government spending on maintenance of flood defences in 2014 was an area of concern. Indeed, the insurance industry demanded assurances that investment would increase as part of the agreement to fund Flood Re.

50. Spending on maintenance has increased since 2015/16, with the overall portion spent on structures and defences also increasing. However, the Environment Agency does not have a duty to continue to maintain flood defence assets once they have been constructed. Therefore, an independent evidence base to outline the benefits of doing so is therefore important to ensure ongoing funding.

51. While the UK Government has committed to investing a further £5.2 billion in flood defences over the next 5 years, a significant proportion of this should be dedicated to the maintenance of existing defences. Alternatively, additional funding on top of the £5.2bn should be provided for asset maintenance.

January 2021