The Association of British Insurers' "Statement of Principles"
on flood insurance is due to expire in 2013, following which flood
insurance in the UK is likely to become harder to obtain for many
residents of flood hazard areas.
This report critically examines approaches to the problem of
flood insurance which were discussed at the "National" Flood Forum
conference on 7th March 2012 - namely, the Oxera approach, the
"Noah" project, the Terrorism Pool approach, and the Morpeth model.
The report also examines the social justice issues raised by a
report for the Joseph Rowntree Foundation (JRF) which was launched
at that conference.
This paper also describes three very different solutions used in
other countries which could easily be transposed into England. It
also suggests an entirely new solution which would meet the social
justice principles required by the JRF, but would not require
taxpayer or insurer funding.
The paper includes a "Five point plan" under which flood
insurance could become much cheaper and more available to all
without any contribution from the taxpayer. Three of the
points have already been implemented in Scotland where they have
been proved to work, but the remaining two are being blocked by the
insurance industry itself, despite the fact that they would produce
significant extra income for the industry. The problem seems to be
a lack of willingness on the part of government or flood insurers
based in England to have an open mind or to learn from experiences
in other countries.
Should the insurance industry be unable to agree any of these
approaches, the author includes a list of options that insurance
underwriters can use to underwrite different problem cases.
Alternatively, there is a description of 42 ways in which
Scotland's flood risk is significantly different from the risk in
England in the hope that this may suggest ideas of other ways the
authorities in England could approach the problem.
Finally there is a reminder that floods are not just about
property. They are primarily about people and there is a section on
some of the public health implications of flood events.
Preface to the second edition
The first edition of this paper was prepared in some haste for
publication on the website of the Chartered Insurance Institute
(CII) prior to the National Flood Forum (NFF) conference on
7th March 2012. As a result, the first edition contained
a few misprints and these have now been corrected for this edition.
The first edition did not contain any information about the "Noah"
initiative as the writer had been informed this was confidential.
However, "Noah" was announced at the NFF conference and so it has
now been included in this edition.
A few additional points have been added arising from discussions
at the conference:
- concern was expressed that drainage systems only have to cope
with 30-year return period rainfalls and so the writer has included
a mention of a paper on this subject which he co-wrote with
drainage experts in Norway;
- some details of the Terrorism Pool have been added following
comments from Gavin Shuker MP, the shadow minister for water and
waste, that it was being considered under the Labour Party policy
- a 42nd difference between England and Scotland has
been added; and
- the public health impacts of flood have now been considered in
Preface to the third edition
The third edition follows the publication of new information
about the number of properties at risk of the 100-year flood in
Wales, including surface water floods. Table 1 has been
updated accordingly. The new figures show that nearly 28% of
households in Wales are at risk of flood. Many were flooded
in June 2012. Despite this, Carwyn Jones AC/AM, Minister for
Environment, Planning and the Countryside, issued circular
CL 09-06 on 10 November 2006, to instruct planners to resume
allowing new building in flood hazard areas.
It is not known if anyone from the insurance industry responded
to this action which appears to have been taken without any
consultation. This is another example of the need for the insurance
industry to establish an organisation prepared to monitor
government actions and lobby for insurance interests.
Many thanks to Steve Atkins, Chief Executive, Pool Re, for his
assistance with the Terrorism Pool section and Christian Ditchburn,
BVMS, MRCVS, for his assistance with the section on waterborne
pathogens and zoonoses.
Please note that this publication reflects the author's personal
views and does not necessarily reflect the views of the Chartered
Insurance Institute or any of the above organisations.
The insurance costs of the floods of 2007 in England, the most
expensive in the world that year from only the 12th wettest English
summer since 1766 were over £3bn from 185,000 claims, but insurers
dealt with them efficiently (Pitt: 2009).
Since 1994, almost all the biggest UK flood events have occurred
in England and Wales (Midlands (1998), England and Wales widespread
(2000 and 2001), Boscastle (2004), Conwy Valley (2004 and 2005),
Carlisle (2005), widespread again (2007 and 2008), Morpeth (2008),
Birmingham (2009), and Cockermouth (2009) (Crichton:
In Scotland, only Moray and the Borders have suffered from major
flood damage since 1994, despite the fact that winter rainfall
increased by over 50% in the West of Scotland between 1961 and
2004. During 2011 Scotland had its highest rainfall since 1910, but
no major floods were recorded.
Sustainable flood management (SFM)
This paper assumes a knowledge of SFM, which is covered by the
GCSE in Geography in schools in the UK. A brief introduction is
available on the CII website.
Government legislation throughout Europe now gives priority to
EU Directives on water quality, habitats etc. These can conflict
with sustainable flood management. For example, the Water Framework
Directive prevents the modification of rivers to cope with
increased flows due to climate change (except in Scotland) and the
Habitats Directive and Birds Directives are used as excuses to
avoid the clearance of weeds and silt from watercourses, leading to
blockages (except in Scotland).
The European public may find it hard to understand that while
there is a legal duty to protect flora and fauna, there are usually
only permissive powers to reduce the risks to people, property and
infrastructure. Such conflicts should not be necessary.
Organisations such as WWF Scotland and RSPB Scotland are to be
praised for showing the way forward with their active support for
sustainable flood management. Despite the primary purposes of these
organisations, even they recognise that people are more important
than animals or birds.
Contrast the November 2009 planning guideline for flood issues
in the Republic of Ireland. This is an 81-page document, based on
English planning guidelines. Insurance is mentioned only
once. Banks, the finance sector, mortgages, blight etc are not
mentioned at all. There is also no mention of social justice issues
or the question of legal liability for injury, loss or damage
caused by flooding. On the other hand, "environment" is mentioned
In the whole of the EU, it is only in Scotland where the
government states that sustainable flood management is more
important than ecology.
A new paper from the Joseph Rowntree Foundation (O'Neill and O'Neil: 2012) has highlighted the
problems facing low income families and vulnerable people in flood
The report explains some of the options facing the insurance
industry and government, and highlights the lack of contents
insurance in low-income households. It argues that social justice
requires measures aimed at protecting those groups.
According to the ABI, there are currently subsidies to 78% of
homes in areas of significant flood risk. In other words, those in
low-risk areas are overcharged in order to keep prices lower for
most residents in high risk areas. There are fears that what the
ABI call "stealth subsidies" may disappear as insurers start to
charge a premium based on risk.
The inevitable increases in premiums in high risk areas could
result in not only a sizeable swathe of blighted properties, but
also very many blighted lives.
The report concludes that a minimal requirement of justice in
any new flood insurance regime is that it protects the most
vulnerable. More equitable results can be achieved in a number of
ways, including for example mandatory cross-subsidisation in the
insurance market, government-backed reinsurance, a public natural
disaster insurance scheme or direct support for those in most need.
There needs to be serious public debate - and quickly - about what
the response to this problem should be.
In this writer's opinion, taxpayer funding to enable the most
vulnerable members of society to live in the most hazardous areas
does seem to be a strange form of "social justice". In the writer's
experience of talking to hundreds of flood survivors, it is not
compensation that most people want; it is a new home in a safe
area. For example, he knows of an elderly lady who literally died
from heart failure due to fear after being forced to return to her
rented home after it was repaired following a flood.
Suicide rates in flooded areas often soar even when insurance is
available. Accurate figures are hard to obtain, but there is
anecdotal evidence that at least 12 flood victims jumped off the
Humber Bridge after the floods in Hull in the summer of 2007. A new
home in a safe area is often a much cheaper solution than the
health care costs of dealing with the trauma suffered by flood
survivors or the cost of building ugly and expensive flood defences
which impose a maintenance burden on future generations and can
often make a flood more dangerous by sudden failure or
The Scottish approach has been characterised by a willingness to
work with insurers and other key stakeholders to solve problems
together. An excellent example is the Flood Liaison and Advice
Groups (FLAGs). Between 2000 and 2003, the Association of
British Insurers (ABI) was instrumental in helping to establish 19
FLAGs with 28 Scottish local authorities covering more than 90 per
cent of the Scottish population.
These FLAGs brought together representatives from the ABI,
property developers, landowners, Scottish Water, the British
Waterways Board, emergency planners, hydrology consultants, SEPA,
Network Rail, the police and fire and rescue services together with
land use planners and development control officers for the local
authority and neighbouring authorities.
All these representatives would informally resolve flooding
issues and in particular make sure that future insurance would be
available. Many of them would hold annual public events to
tell the public what was happening. All of them published their
minutes and talked to community groups.
There is no doubt that this was a very successful initiative
from the insurance industry which helped to stop flood plain
development in Scotland in its tracks. Of those areas with a
flood risk, only Moray refused to establish a FLAG with insurance
representation and it continued to develop in the flood
plain. Moray now has serious flood problems and many of their
residents have difficulties obtaining flood insurance.
FLAGs provided much valuable advice to Scottish planning
authorities and helped to spread best practice and catchment-scale
policies. While most FLAGs have completed their aim of changing the
mindset in Scotland, a number are still meeting because the local
planning officers find them so helpful.
None of this happens in England or Wales. A recent report from Manchester University stated that in
- local communities and key stakeholders are ignored when forming
local planning policy;
- there is a tendency for flood risk to be assessed and mitigated
on a site-by-site basis, inhibiting the potential for strategic
- there are difficulties in balancing socio-economic and
environmental priorities against flood risk concerns.
Shareholders will expect the prudent insurer to reflect the
different approaches in the different countries of the
They should also remember that there are also different
approaches between countries of the UK as regards resilience to
other perils, such as storm.
The Crichton risk triangle.
The "Crichton Risk Triangle", was designed for use by the
insurance industry for catastrophe modelling (see Figure 1).
Catastrophe models work on the basis that "risk" is a function of
hazard, exposure and vulnerability, and each factor needs to be
considered independently. Risk is represented by the area of an
acute-angled triangle. If any one side can be reduced then risk is
Figure 1. The "Crichton Risk Triangle" (© Crichton, 1999)
In the case of flooding, "Hazard" represents the frequency and
severity of rainfall events or storms. Climate change predictions
indicate an increasing hazard over which society has little
immediate control other than to clean watercourses, provide
adequate drainage, and adopt natural flood management
Increasingly, European countries are working together to effect
these practices. For example, Germany is working with France on the
Moselle catchment, and with the Netherlands on the Rhine.
Germany is also working with Scotland on sustainable flood
management techniques. In a current EU funded research
project, Scotland has been held up as an example to the rest of
Europe in work on making cities more resilient. Wales has
introduced some sustainable flood management techniques, but apart
from a small demonstration project in Ripon, England is not using
sustainable flood management at all.
This represents the density and value of property located in
flood hazard areas such as near rivers, the coast, below dams, or
on low lying land, especially at the foot of a slope.
Population growth, migration, and smaller (often single person)
households have meant a huge demand for land for development in
many countries. In England, new build has reached an average of
around 40 dwellings per hectare. In the Thames Gateway floodplain,
a density of 200 dwellings per hectare is planned. Climate
change and the "heat island" effect of densely populated areas can
increase the frequency and severity of localised rainstorms in
urban areas, leading to more flash floods.
This refers to the flood resistance and resilience of the
properties insured. A building's vulnerability depends on the
design and construction. One answer is simple: to implement more
resilient building regulations and standards, based on the latest
research into the vulnerability of different materials.
The use of non resilient materials in flood risk areas is not
sustainable; it simply leads to more debris for landfill every time
there is a flood. Insurers are reluctant to practice resilient
reinstatement if it costs more. Builders are often reluctant to
reinstate in a non-standard way, even when it takes no longer and
costs no more. For example, employing measures such as
putting electrical sockets higher up the wall, fitting plaster
board sheets horizontally rather than vertically, etc.
Scotland has primary legislation in place to require resilient
reinstatement after a flood or storm so that repairs are carried
out to current building standards. This is an excellent way
to improve resilience in existing building stock, by concentrating
on those most at need - that is, those which have been damaged by
flood or storm. This measure has not yet been implemented,
but insurers have indicated they would welcome it as, although
claims would cost more in the short-term, they would be working on
a level playing field and claims should therefore reduce in
It is not just buildings; typical household and business
premises contents are more valuable and more vulnerable than ever
before. Electronic goods, chipboard and melamine furniture are
especially at risk, as are foodstuffs. Baby clothes and toys need
to be destroyed for health reasons if contaminated by flood water.
Contents of single-storey properties, ground floor or basement
flats are difficult to move to safety. Resistance measures such as
flood-proof doors and windows or demountable defences can reduce
damage to contents.
Building regulations in England and Wales do not address the
issue of resistance or resilience, meaning that properties and
their contents are especially vulnerable.
Exposure and land use planning issues
A growing understanding of engineering and natural systems,
combined with a long spell of relatively few UK floods between 1954
and 1990, seems to have made planners more confident that they
could use floodplains in ways which would have seemed foolish to
With hindsight and a growing awareness of the uncertainty
inherent in extreme flooding events, these decisions now appear
unwise (Cook: 2010). Insurers are well aware
that the properties at the greatest risk of flooding are often
those built during this post-war period. It is only now that there
are moves for floodplain restoration in areas such as Berkshire,
Conwy Valley, Dorset, and Hampshire.
It is particularly unfortunate that a combination of factors has
meant that many older properties which were once safe from flood
are now exposed, due to new factors such as:
- changing land practices to increase arable production,
including the digging of field drains and construction of
embankments to protect fields which used to store flood water;
- covering the flood plain with impermeable roads and buildings
thus reducing flood storage;
- overloading sewers and watercourses by new urban development;
- failing to clean sewers, watercourses, gully pots or culverts
clogged by fly-tipping due to the Waste Directive.
Table 1 shows that while new building in flood
hazard areas has virtually ceased in Scotland, Wales and Northern
Ireland, it has continued in England.
Table 1: River, coastal flood and
surface water flood exposure in Britain. 100-year return period for
river and surface water flood in England, Wales and Northern
Ireland. 200-year return period for Scotland and coastal
(*100-year figure for Scotland is negligible)
These figures do not include properties within the danger zones
of dam break risk. Dam break maps started appearing in 2011. There
are 680 large reservoirs in Scotland and 2010 in England and Wales.
69 per cent of large reservoirs in England and Wales are a risk to
the public according to the Environment Agency.
No. of households in 2011 (millions)
Population in 2009
Flood exposure in 2011
Pop per sq. km
At-risk households (000)
Proportion of existing properties at risk
Proportion of new build in flood hazard
Negligible under 2004 planning policy
Negligible except in Moray (since 1995)
||Negligible (since 2006)
Note 1: The Environment Agency suggests that
2.8 million households are at risk of surface water flood in
England. Figures for Wales include surface water flooding.
Note 2: It is clear that Wales has by far
the biggest problem with flood exposure. Wales stopped allowing
flood plain development under a new planning policy issued in 2004.
However, Carwyn Jones AC/AM, Minister for Environment, Planning and
the Countryside, issued circular
CL 09-06 on 10 November 2006, to instruct planners to resume
allowing new building in flood hazard areas. Presumably this was
following pressure from property developers. It is not yet known
what effect this has had or whether planners followed his
instructions, as obviously this is not something the Assembly wish
to publicise. If you have any information about this matter, please
let the author know.
Sources: Office for National Statistics, the Environment Agency,
DCLG, the Welsh Assembly, the Scottish Government and the Northern
Ireland Rivers Agency.
Planning decisions in different regions of England have shown
considerable variation over the years, but Yorkshire, Humber, East
Midlands, and London stand out as having particular disregard for
the dangers of flood plain development (see Table
It has been argued that some of this development is in so called
"brownfield" sites, especially in London, but without resilient
designs and construction standards this is just as unacceptable to
insurers. It is interesting that despite pressures on land,
planners in the South East manage to keep the proportion of
floodplain building consistently lower than Yorkshire, which has
much more land on high ground away from flood risks.
Table 2: Land use changes. Table P251
published by the Department of Communities and Local Government,
The data in the table above is based on records received from
Ordinance Survey up to March 2011.
The table is therefore consistent with the Statistical Release
published on 29th July 2011.
There is a time-lag between land use change occurring and it being
recorded, because some changes can take a few years to be recorded,
therefore data is constantly being updated. Please see LUCS
Guidance 3.2 for more information.
Areas of high risk cover approximately 10% of England.
Comparisons between regions are affected by the varying proportions
of areas of high flood risk in each region.This flood risk analysis
is based on annually updated data sets of digitised boundaries
provided by the Environment Agency. They reflect the river and
coastal floodplains and provide indicative flood risk areas. They
are estimated to be at risk of at least a one-in-100 chance of
flooding each year from rivers or areas estimated to have at least
a one-in-200 chance of flooding from the sea. These are approximate
boundaries and do not take into account any flood defences.
Please see LUCS Guidance 6.2 and .63 for more information.
Contact: 0303 444 2280 / firstname.lastname@example.org
Most Scottish local authorities follow elements of the Crichton
insurance template (see Table 3) to avoid the
situation of allowing the construction of properties which may
become uninsurable and therefore blighted. The Crichton template
suggests higher standards for vulnerable people.
|Type of property
||Return period (years)
||Annual probability (%)
|Housing for the disabled or elderly
|Touring caravans for seasonal occupancy only
Note: Extracts from the residential property
section of the Crichton insurance template showing the levels of
risk which may be insurable at normal terms. Higher risks may be
accepted with premium loadings, but such risks could become
unattractive to insurers under the Solvency II
Directive. The Crichton template is not a market agreement,
By contrast, in England, new developments are still taking place
in high-risk areas. It is becoming increasingly difficult to obtain
insurance in such areas.
Mortgages are not granted without insurance so prospective owner
occupiers are forced to seek properties in safer areas. This has
not stopped developments in high risk areas; it simply means that
property developers have tended to build for customers who do not
need mortgages. For example:
- Single-storey houses for elderly people who
have retired and decided to downsize and sell their existing homes
when their mortgage has matured. They buy a home with the proceeds
and use the remainder to supplement their pensions. This is
especially common in seaside resorts. For example, most of the
bungalows and static caravans flooded in Towyn in 1993 were
occupied by people who had retired from Liverpool. They had no
mortgages and as a consequence were not required to have
- Social housing for sale to housing
associations for rental to low income families, especially single
parent families with young children.
- Sheltered housing and nursing homes for the
elderly and infirm.
- Orphanages, children's homes and homes for the
disabled. To make matters worse, in England the Disability
Discrimination Act requires houses to have no doorsteps and to have
ground floor toilets, even in flood risk areas, thus making them
much more vulnerable to flooding and sewage backup. In Scotland,
building regulations require special resilience and resistance
measures in flood hazard areas in such a way that disabled people
are still catered for. This of course begs the question of why
society causes disabled people to live in high-risk areas in the
- Schools and hospitals. An unpublished
insurance survey revealed that at least 89 hospitals in England are
at a high risk of flooding and 70% of them have no flood defences.
There are also 2,374 schools at high risk in England. During the
tsunami in Japan in 2011, patients in intensive care in hospital
were simply left to die as there was no time to evacuate them
The effect is that while these vulnerable people get special
protection from the Crichton template in Scotland, in England they
are precisely the people most likely to be forced to live in the
most hazardous areas.
For the last 50 years, the insurance industry has bowed to
government pressure to keep rates low in flood-risk areas. This has
meant that policy-holders in safer areas have been overcharged for
many years in order to subsidise those in high-risk areas.
This is becoming unsustainable. For example, some of the
cleverer insurers have realised that they can easily undercut the
premiums in low-risk areas such as Scotland. People living in high
flood hazard areas may find the availability and affordability of
flood insurance affected not only by the erosion of the subsidy,
but also by the following three looming deadlines:
1 July 2013
Currently, those living in many flood hazard areas are protected
by an understanding between the Government and the insurance
industry (other than Lloyds) that flood insurance will continue to
be available in all cases where the property was built before 1
January 2009, provided the flood hazard does not exceed the 75-year
return period (1.3% cent annual probability), or in higher hazard
areas where flood defences are planned to be in place within five
Insurers have announced that this understanding will expire on
30 June 2013 and will not be renewed. In the long run this will be
a good move, because flood insurance provides economic penalties to
discourage building in flood hazard areas. As such it has an
important role in sustainable flood management policies. However,
in the short term withdrawal of insurance cover is likely to lead
to blight and a fall in property values.
22 December 2013
Under the EU Flood Directive, by 22 December
2013 flood maps must be published showing areas at risk of a
100-year return period flood from rivers or coasts. In Scotland,
these maps include surface water, groundwater and drainage or
sewage flood risks. The first drafts of these maps have already
31 December 2013
Insurers are preparing for the EU's Solvency II
Directive which is due to apply to all 5,200 large insurance
and re-insurance firms in Europe from 1 January 2014 (although this
may be postponed for a year to accommodate French insurers who are
Among other things, regulations will require insurers and
re-insurers to calculate all risks they face up to the 200-year
return period event in order to calculate their solvency capital
requirement. The more insurers can remove flood risks with a higher
risk than the Crichton insurance template from their books, the
less capital will have to be reserved and the less their
re-insurance will cost. Insurers will probably prefer such risks to
"go away" owing to high premiums than to have to decline
It was only in 2007 that a generally applying legal definition
of "flood" emerged for the first time, enabling insurers to apply
flood excesses or even to exclude flood cover altogether (Board of Trustees of the Tate Gallery v Duffy
Construction Ltd ). Although insurers have not generally
used their new-found ability to exclude flood cover (and it would
probably not be allowed by the insurance regulator anyway), pricing
and excess increases will be enough on their own to have serious
effects on insurance rationing. Consequent mortgage rationing will
cause house prices to fall quickly and permanently in flood hazard
The last 50 years have been characterised by commitments made by
insurers in return for "requests" to the government to control
floodplain development and increase spending on flood defences. All
that has happened in England is that floodplain development has
become easier by a succession of planning policies and spending on
flood defences has been reduced. Localism will add a further spurt
to flood plain development and the recession will further erode
spending on flood defences.
Republic of Ireland
To see what is likely to happen after 2013, one only has to look
at the Republic of Ireland. The insurance market there has never
been distorted by any Statement of Principles. The market
penetration of flood insurance in Ireland is much higher than in
England. The Irish government has slavishly followed English
planning guidelines which is to say, they allow virtually
unrestricted development in the flood plain.
Irish insurers have benefitted from the fact that there is no
postcode system in Ireland outside Dublin so they use a much higher
resolution geo referencing system instead. Irish geographic
information systems are much more sophisticated than in England and
they can rate properties by grid reference.
The result is "blue-lining" of areas where it is simply not
possible to obtain flood insurance. These areas have been blighted
thanks to the actions of planning authorities and eventually will
be abandoned by residents and businesses. Ultimately the abandoned
properties will fall down, thus returning the flood plain to
What will happen in England?
The expiry of the Statement of Principles should have little
effect in Scotland or Northern Ireland. It could, however, have
serious impacts in England where widespread "blue-lining" is
increasingly likely. From one point of view, this would be a good
thing in that, in the long-term, flood plains would be restored and
fewer people would suffer from flooding.
In the short term, there are serious transitional issues.
Various options have been suggested:
The Oxera approach
The economic consultants Oxera were commissioned by the
Association of British Insurers (ABI) to advise on a solution to
the problem of insurance in high-risk areas. They reported to the
ABI in September 2011, but at the time of writing the report has
not yet been published and is still confidential. However, the ABI
has made a presentation
based on this report.
Oxera‟s proposed solution is a high-risk pool, to which all ABI
members would have access and which would underwrite the flood
element of a household policy at a subsidised premium. Subsidies
would come from government, consumers, and the insurance industry
and would be transparent. It suggests a flat rate on the sum
insured regardless of the flood risk so that high-value properties
would receive more subsidy than low-value properties.
In other words (although this is not stated) this would
discriminate against vulnerable low-income policyholders. The
advantage for ABI members (although, again, this is not stated) is
that major composite insurers with a large book of legacy business
in flood hazard areas could shed the tainted part of the risk and
retain the profitable part with all of its opportunities for
cross-selling motor and life and other products.
Defra's response was to reject the possibility of a government
subsidy which leaves the model dependent on continuing subsidies
from low risk policyholders.
The Morpeth model
Morpeth is a town which was badly flooded in 2008. The flood
defences in the centre of town did not help, and if anything made
the floods worse by stopping the water and sewage from draining
back into the river.
Morpeth residents participated in a survey into the effect of
the floods on their insurance costs and found that the average
increase in insurance was over 70%.
The Morpeth Flood Action Group, Morpeth Town Council, and
Morpeth Chamber of Trade have subsequently worked on developing a
and this was completed in November 2011.
The original Morpeth model, published in August 2010, was that
all flood claims would be paid by a flood pool. This contrasts with
the Oxera model where the pool is exclusively for high-risk
properties. The original Morpeth Model envisaged a community flood
levy on all household policies.
However, the authors changed their minds about their model
because it did not reflect the risk and there was no financial
incentive to reduce risk and no scope for insurers to compete to
provide the best terms.
The revised Morpeth Model retains the idea of some form of
pooling, but differs from the Oxera model in a number of ways.
First they offer some comments on the Oxera model as follows:
- Whilst low-risk policies are administered by the insurance
company, it is not clear who takes on the high risk policies. If
they are to be administered by a separate entity employed by the
pool the costs incurred by that entity could reduce the value of
the savings that might otherwise be made.
- Because the threshold is based on cost of reinstatement
with no reference to the ability of households to pay, properties
could be ceded to the pool purely because of their size and not
because of flood risk. This could mean that higher earning
households would receive more of a subsidy than those less able to
- There is no explanation of where the subsidy would come
from. Government is not likely to provide it. The subsidy will
therefore have to be raised from within the industry.
- Although a competitive market is retained there could still
be an element of cherry-picking by some insurance companies as they
attempt to reduce premium assessment costs. That could impact on
the cost of the risk assessed premium ceded to the pool.
- If those administering the pool decide to employ their own
risk assessors there will be additional costs.
- There is a danger that the model could create a two tier
market that is not equitable.
- The insurance industry is failing to share the exposure to
claims from properties at high risk of flooding.
These are all sensible comments.
The Morpeth Model basically involves a continued subsidy from
low-risk properties to high-risk properties, but the subsidy would
be more transparent and would be based on the Council Tax Band of
This would be more equitable for low income families, but would
enable property developers to continue to develop in flood plains
and sell their developments to private buyers and not just to
institutional buyers. So this is likely to be supported by property
developers and the big composite insurers and the ABI. It would
reduce the possibilities of blight and effectively prevent
floodplain restoration. It still envisages some short-term
Government support until the pool is funded.
The authors of the Morpeth Model draw favourable attention to
the Scottish FLAGs system and recommend that a similar system be
introduced in England and Wales. They also suggest that while
developers would still be allowed to build in the floodplain they
should be required to pay a bond into the pool to cover possible
future flood damage and consider this would "encourage robust and
Unfortunately, of course there is no guarantee that developers
would be willing to pay an adequate bond without compulsion,
knowing that if there is a flood they are immune from legal action
for damages. Far less is there any chance that they will implement
"robust and sustainable design" without the compulsion of resilient
This is a solution proposed by the insurance and reinsurance
brokers Marsh and Guy Carpenter, both part of the Marsh &
McLennan group of companies, working with Landmark, an insurance
information company and RMS, a catastrophe modelling company linked
This solution would allow insurers to pass on the peak flood
risk for their entire portfolio to Noah under a quota share
agreement to cover their retention under their reinsurance
treaties. The insurer would retain a small proportion - say, 10%.
Noah would price the risks based on the nature of that insurer's
portfolio using specialist underwriters and information systems.
Insurers could then pass on these costs to some or all of their
customers in whichever way they wished.
This solution allows the insurers to keep their customers and
cross-sell other products to them such as motor or life business.
It is currently being tested with a selection of insurers with a
view to launching in summer 2012.
Noah claims that it has created a model to determine the
technical risk for every property in the UK using the RMS model and
property data from Landmark, and that its specialist flood
underwriters would have access to information available on flood
risk and would price the business accordingly to the direct
insurer. The pricing could reflect risk reduction measures
taken by the policyholder.
The insurer would benefit from a reduced solvency capital
requirement under the Solvency II Directive and the customer would
benefit from continuity of cover and the ability to shop around for
the best deal, depending on how the direct insurer apportions
premium costs around its portfolio.
A major composite with a lot of legacy business in the flood
plain might continue the subsidies from low-risk properties to
cover the premiums for high-risk cases. A newer insurer such as
esure or Halifax, holding little high-risk business but with better
knowledge of the differences between Scotland and England would
have the opportunity to do away with subsidies in order to
cherry-pick low-risk cases.
Noah therefore has many attractions:
- The major composite with considerable legacy business in flood
hazard areas may be able to underwrite the flood risk more cheaply
by passing the risk to Noah. In any event, they can make savings on
the Solvency II Directive and retain business in flood hazard areas
- The newer insurer who has been careful to avoid flood hazard
areas can get a cheap quote from Noah for any flood risks it has
inadvertently picked up. Its costs will still be low and this will
enable it to continue to cherry-pick business in low-hazard areas.
Alternatively, it will be able to start actively writing business
in flood hazard areas knowing that it can cede the flood risk to
Noah has indicated that it will also be prepared to model the
flood risk costs in areas of social deprivation in order to provide
an indication to government of the extent of subsidy needed to
offer affordable insurance for low income households.
The Terrorism Pool solution
At the time of writing, this is the solution being considered by
the Labour Party in Parliament for their next policy review, so it
is worth looking at it in some depth.
Pool Reinsurance Co. Ltd was established in the UK in 1993 in
response to the terrorist explosion in St Mary Axe in London at the
Commercial Union insurance head office. From 1993 to 2001,
there were ten major terrorist incidents in the UK, the biggest
being the Manchester Arndale centre in 1996 and the Warrington bomb
July 2005 saw the London Transport explosions with over 50
killed. There was an attack on Glasgow Airport in 2007. The current
security level in the UK is "Severe" which means that intelligence
suggests another attack is "highly likely".
Following the 1992 bomb, the insurance industry found that it
could not continue to underwrite terrorism and threatened to
withdraw cover. This prompted the UK government to agree to play a
role in an industry-led solution.
Since the pool was established in 1993, total claims paid amount
to over £600m. Current premiums total £300m per annum.
Pool Reinsurance Co Ltd is a private mutual insurance company.
Its solvency is (in effect) guaranteed by HM Government and it is
owned by member insurance companies.
Pool Re only writes commercial property and business
interruption risks. It does not cover personal insurances or
liability insurance. It may cover residential property, provided
this is owned by a commercial business. It only covers
property in Great Britain. There is a separate government
compensation scheme for Northern Ireland.
Members agree to always offer a quote for terrorism cover where
requested. The retrocession cover with government is unlimited
but any monies drawn must be paid back out of future
premiums. Any properly authorised insurer can become a
The terrorism cover must be linked with a general property
insurance cover with the same terms, limits and conditions.
A no adverse selection principle applies. That is, members have
to cede all their terrorism risks and policyholders have to cover
all of their properties for terrorism or none of them. This is to
ensure that the book of business is diversified, with adequate
Definition of "terrorism"
Terrorism is defined as an activity directed towards the
overthrowing or influencing of government using force. "Influencing
of government" makes this a wide definition which could include
ideological terrorism against civilians, providing the organisation
has the influence of government as an aim.
Insurers use a similar definition to exclude terrorism so there
is unlikely to be a problem of an event "falling between two
stools". According to Atkins, in practice the main issue arising
from the definition is the question of where an insurer goes to
seek recovery following an event rather than whether the insured
has cover under the policy.
- war and related causes;
- damage by computer viruses, hacking and other cyber crime;
- there is no exclusion of chemical, biological or nuclear
The primary insurer pays the claim and then, following a
certification process makes a recovery from Pool Re.
Terrorism risk has a number of features:
- deliberate act on the part of the terrorist;
- frequency can be influenced by political and social
- motivation of perpetrators can be complex and is often not
driven by money;
- impossible to predict frequency or severity;
- the risk is constantly evolving;
- a terrorist campaign could result in multiple attacks;
- clear catastrophe potential.
Could a Pool Re type solution work for UK flood
Prior to 2007, a Pool Re type solution for UK flood insurance
would not have been possible because there was not a clear legal
definition of the word "flood". This changed with the EU Flood
Directive and the Tate Gallery court case.
A Pool Re solution works for terrorism, but flood risks are very
different. While a flood could happen anywhere, there are some
areas where the hazard is much greater; for example, low-lying
areas near rivers or the sea, or in areas where watercourses and
drains are inadequate or not properly cleaned or
maintained. These areas can be identified objectively and
hazard calculations made.
However, a flood pool could operate on similar lines to the
Terrorist Pool. A private mutual insurance company owned by its
members would be obliged to consider underwriting the flood claims
from any policy issued by a member, but would be free to charge
whatever premium was appropriate. Unlike the terrorism pool, in
some cases the flood risk would be so high that it might have to
reserve the right to decline cover for particular areas unless
flood resilient construction has been used - for example, building
on stilts, or floating houses.
The flood pool insurer would need to invest in or take over
ownership of whatever flood risk databases have been created by
member insurers so that its expertise is at least equal to and
ideally greater than any one member. Ideally it would benefit
from an agreement with government to act as insurer of last
Flood risks could be underwritten either on a primary, or on an
excess of loss basis and this might have to be decided at the
outset and apply to all flood risks. It would also have to be
decided whether to include private residential property risks owned
Would such a solution be of benefit to insurers and the
Much will depend on the point of view...
The insurance industry as a whole
- By concentrating the risk and the expertise in one company,
that company would have the resources and the expertise to act as
an influential and powerful lobbyist to persuade government to
tighten up land use planning policy and building regulations. It
would have the power to stand up against opposing interest groups
such as property developers and land owners, and could work in
partnership with NGOs such as the "National" Flood Forum and
- It could send insurance industry representatives to attend
meetings with local planning authorities (as used to happen in
Scotland) to influence their decisions on particular developments
and flood defence schemes and speak authoritatively on flood
- It could commission research into flood and flood risk
- During and after a flood event, it could commission airborne
and satellite based surveys of the extent of the flood, to assist
with future mapping and with claims validation, and to reassure the
stock market about the extent of possible losses.
- It could organise claims management on a more rational basis by
allocating whole streets to each loss adjusting company to make
claims management more efficient and improve customer service.
- It could provide training for loss adjusters in handling flood
- It could introduce the flood and storm event reporting (FASTER)
system to streamline claims handling and data collection and to
identify potential fraudulent claims.
- It could take over the sponsorship of the National Flood
Insurance Claims Database in order to carry out sophisticated
modelling and claims validation.
- It could negotiate cheaper flood reinsurance terms than any
- It could spread best practice from other countries.
- It could negotiate with architects and property developers to
provide more resilient buildings; for example, building on stilts
or using the ground floor for car parking, installing flood proof
doors, windows, walls and airbricks, fitting non return valves on
drainage etc. It could introduce an approvals scheme which would
allow insurance to be offered on buildings in high-hazard areas
provided they are built to the flood pool standards. There is a
precedent for this in the Blue Book system used in Australia.
- Even in a Pool Re type scenario it is not appropriate for the
industry to use policyholder premiums to pay for flood risk
management schemes which benefit insured and uninsured equally.
However in the context of flood research, it could fund
demonstration projects on natural flood management and resilient
reinstatement methods to help lead the way to a more sustainable
flood risk management policy on the part of government.
- It would be expensive to set up, not only buying in data, but
also expertise including hydrologists and mapping experts.
- Larger insurers which have already invested in flood risk
expertise might feel that they are losing competitive advantage and
barriers to entry.
Pro: would enable flood insurance to still be available, but at
a price which is likely to be very high.
Con: the public would no longer be able to shop around for a
cheaper quote for flood cover and such a pool might be considered
to breach competition legislation.
- would enable them to clear flood hazard policies off the
balance sheet without incurring public relations problems
- would reduce the need to invest in flood maps and geographic
- would enable them to write otherwise profitable business in
high flood hazard areas currently avoided by them.
Con: might be expected to share the losses of the pool depending
on how it is set up.
Pro: would enable them to solve the issues of accumulated legacy
business in high flood-hazard areas in readiness for Solvency
Such insurers are likely to have large investments in high
resolution flood maps and geographic information systems to
identify flood risks at individual address level. They are likely
to see four advantages from these systems:
- they create barriers to entry for new insurers without such
- they offer competitive advantage in that the insurer can
underwrite flood risks more accurately.
- they enable better reinsurance rates than competitors.
- they enable the insurer to write otherwise profitable business
in high flood-hazard areas which are currently avoided by the rest
of the market.
Large insurers might then see joining a pool solution as giving
up their current advantages.
At present, to satisfy the requirements of mortgage lenders
where the property is used as security, if must have insurance
cover which includes the flood risk. If an excess applies it must
not exceed £2,500. Many insurance policies now have flood excesses
greater than this amount, and an increasing number exclude flood
Summary so far
There are four possible approaches on the table:
- Oxera suggest a solution that suits the major composite
insurers who dominate the ABI. Namely: a pool to take away the
toxic flood risks from those insurers' books, leaving them with the
profitable parts of their accounts which they can then milk for
cross-selling other products. Whitehall is unwilling to pay
subsidies, so where will the money come from?
- Morpeth suggest a well thought-out approach. They recognise
that the Government would not subsidise high-risk cases and
recommend that the community do so on the basis of council tax
band. Would local communities be happy with yet more taxation to
help a minority who have chosen to live in nice places like
- The Noah Project is a variation on the Oxera approach but the
ABI has refused to support it, claiming it will not fulfill its
aims of maintaining affordable flood cover. It is, however,
supported by the British Insurance Brokers' Association
- The Terrorism Pool approach. The Government would collect a
premium from a high-risk flood insurance pool and would pay out to
the pool in the event of a major loss. In other words, the
Government would act as a reinsurer of last resort. The scheme
works well for terrorism where the losses are very uncertain and
could be substantial. It is less likely to work well for flood,
where specialist underwriting would be required to properly assess
The writer would like to mention some alternatives which might
Alternative 1: a variation on the Australian
Australian insurers solved the problem of high levels of damage
claims from storms. They were frustrated that government refused to
implement resilient building standards which were effectively set
by property developers to keep costs low.
As a result, the insurance industry produced their own building
standards called the Blue Book. They worked with banks to ensure
that property owners would not be able to get affordable insurance
or mortgages unless their property was constructed according to the
The Government continued to spend money on maintaining their
inadequate building standards, but builders soon learned to ignore
them and use the blue book instead for all new build and repair. It
took a few years, but now the buildings in Australia are much more
resilient against storms and hurricanes. However, the land use
planning systems in Australia still leave much to be desired.
There is no reason why insurers and mortgage lenders in the UK
could not follow Australia's example. They do not even have to
write their own blue book. All they need to do is to say that they
will not insure or issue mortgages to any new property that does
not comply with Scottish building standards or with the Crichton
As an interim measure, they could maintain subsidies as before,
but should note that it will be increasingly hard to collect a
disproportionate share of subsidies from policyholders in Scotland,
Wales and Northern Ireland where flood plain development no longer
Alternative 2: the Ontario
If a problem has been allowed to build up, then a solution that
is initially more expensive for the taxpayer but is also more
sustainable and compassionate than the first option is to correct
the errors of the past by providing funding to enable people to
move away to a safer area.
This policy has already been introduced in Moray in Scotland
where, for many homes, it was found to be much cheaper than
building flood defences. Generally this solution would be cheaper
in Scotland where fewer properties are at risk.
For insurers it could work in the same way as the "total loss"
clause in motor insurance. This usually states that where a car is
so badly damaged in the first year that repairs would cost more
than 60% of the value, it will be replaced with a brand new car. A
special clause on a household buildings policy could state that if
the flood damage was such that repair costs would exceed a
percentage of the market value of the property as agreed at each
renewal, the insurer could simply pay the market value and take
possession of the building. The insurer could then demolish the
building and replace it with a building on stilts or wheels or
leave the site open as recreational space to provide flood
The best examples of such "buy out and relocate" schemes are
those which operate in Ontario, Canada and North Dakota, USA. Under
these schemes, the state buys the property at market price and
demolishes it, returning the land to parkland for recreation. In
Ontario, property owners in flood hazard areas are not allowed to
sell their property to anyone other than the state.
In North Dakota, evacuated properties are often bulldozed to
prevent the residents moving back in. The photograph below was
taken by the writer from a bridge over the Thames River in the
centre of London (Ontario). On the left bank is the old fashioned
solution of flood walls which make the river look ugly, and
unnatural. The walls have been left to protect a baseball court
(you can see the floodlights in the photograph) but are not
maintained. On the right bank is the sustainable flood management
solution, where all the properties have been bought by the state at
market value and then demolished.
Image 1: The Thames River in the centre of London, Ontario
(Copyright Crichton: 2001.)
This has been the policy since 1964 and London now has an
attractive riverside parkland right through the centre of the city,
providing recreation and breathing space for the citizens. The
flood walls on the left bank will be allowed to collapse
eventually. This is surely a better solution than using taxes to
enable people to continue to live in a high risk area?
Alternative 3: the Scottish Solution
Persuade planners to refuse planning permission in flood hazard
areas especially for vulnerable uses in line with the Crichton
insurance template shown in Table 3. This has
been the case in Scotland since 1995, and this firm approach has
meant that developers have by now sold almost all their land banks
in high-risk areas (other than Moray) and accept that they will
never get permission to build there.
Developers have accepted the position with good grace because
they recognise that almost every local planning authority follows
the same template so they are working on a level playing field and
developers cannot play one authority off against another (they did
try this at first).
They also realise that if the planners give consent and there is
a flood, it is not just the planners, but also architects and
developers who could be subject to litigation to pay the costs of
any flood damage and to pay compensation for the distress caused.
They cannot be sued for such damage in England.
If it is to be introduced in England, the Scottish solution
requires a sea change in the culture, legal system, planning
policies etc. Scottish culture is perhaps less preoccupied with
helping property developers make profits. However, some of the 42
differences outlined in Table 7 may be
transferable to England.
To sum up the alternatives:
- The Australian approachwould only work well if all
insurers and mortgage lenders could be persuaded to work together
and adopt a common stance to the issue of insurance and mortgages.
This is unlikely, and besides it would only assist in making new
and repaired properties more resilient. The problem is too urgent
to rely on the Australian solution alone. Nevertheless there is
much to be said for trying it for the benefit of future
- The Ontario solutionis the only truly sustainable policy, given
the extent of flood plain development which has already taken
place. It is however the least likely to be selected.
- The Scottish approach is cheap and very effective. There are
many ways in which the Scottish flood risk is lower than in England
and 42 are listed in table 7. Perhaps one or two of them could be
copied in England some day? In the meantime it would seem grossly
unjust to expect Scottish residents to continue to subsidise
property developers in England.
So, having pointed out the problems with each of these
solutions, can this author suggest a more practical solution? Yes
The Crichton solution
The first priority of any solution is surely to solve the
pressing and urgent problem of social justice as explained by the
excellent Joseph Rowntree Foundation report. The only problem is
how to pay for it and how to prevent cheap flood insurance
encouraging property developers to continue to build in the
The issue of civil litigation has received a lot of attention
recently owing to its growing cost. Lord Justice Jackson carried
out a full scale
review into this cost in 2010. Lord Young also carried out a
review of health and safety legislation. These reviews tried to
get a better balance between access to justice and burdens on
In announcing the results of the Young Review, Lord Young
commented that health and safety rules had become a "joke" and were
responsible for endless form filling and bureaucracy. Yet when it
comes to those responsible for placing vulnerable people in homes
which are at a serious risk of flooding, they seem to get away with
it entirely. They cannot be sued in England or Wales.
In environmental risks, there is a well established principle;
"the polluter pays". When it comes to flood, one should
remember Gilbert White's words: "Floods are 'acts of God', but
flood losses are largely acts of man" (White:
1942). Those responsible for flood losses are clearly
the planning officers and committees, the hydrology consultants,
the property developers and the architects; in other words, the
experts people rely on to take reasonable care to avoid damage or
Insurers and communities should work and lobby for the following
- Change the law in England and Wales to make these "experts"
legally liable when they get it wrong and people are flooded. This
might not be so hard as it sounds. The law was only changed in the
Ryeford Homes case in 1989 when developers and planners were given
legal immunity thanks to the efforts of clever counsel (Ryeford Homes Ltd v Sevenoaks District Council
). Before that, planners were liable (Hedley Byrne v Heller 1963).
- Surprisingly, the ABI has not expressed any interest in this
approach. If the ABI is unconcerned about this, perhaps Lloyds and
individual insurers could get together and try to change the law
back again or even persuade Parliament to introduce legislation
similar to Scots Law? Alternatively, perhaps some enterprising
solicitor might fund a test case on a "no win no fee"
basis. It would be well worth taking a few class actions to
court to try to change the legal principles because then insurers
could start to recover the billions of pounds that flood claims
cost from the people responsible for causing the flood losses.
Perhaps this might change the behaviour of developers and planners
- it certainly did in Scotland - and it would also provide an input
of funds to reduce insurers' claims costs. Insurers would then be
more inclined to charge lower premiums. Courts might even be
prepared to grant punitive damages which could be used to
contribute to a fund to subsidise insurance premiums for low income
families. Such a change in the law could also help owners of
very old properties which have just started to flood in recent
years due to development upstream.
- Many thousands of people in the UK are vulnerable to the risks
of dam break, and while the law does make reservoir owners liable
in such cases, so many homes could be flooded that most reservoir
owners would not be able to afford to pay compensation to
everyone. The Scottish Parliament recognised this and
recommended that reservoir owners should be subject to compulsory
public liability insurance to prevent the homes in dam-break danger
zones from being blighted. For some inexplicable reason the ABI
objected to this move. This short sightedness will result in a
growing number of homes becoming uninsurable as dam break maps
start to be published.
- Until 2011, dam break inundation maps in England have always
been secret so that people were building in danger zones without
being aware of the risks. In England alone 1,386 large
reservoirs have people living in the danger zones immediately below
the dam wall. The total figures are still secret, but on a
conservative estimate, if there are on average only 1,000 homes at
risk below each dam, that represents over a million additional
households at risk. In one case, a 300-year-old dam has 40,000
people living in the direct path of a dam break inundation. The
walls of that reservoir are cracking and subsiding due to general
subsidence from coal mining. When movement detectors showed
the embankments slipping the owner simply ordered them to be
disconnected. While most major corporate reservoir owners will have
cover, it may not be adequate, and many other owners will have no
cover at all. It would be prudent to assume that there
will be no guarantee of recoveries of flood losses from reservoir
- Stop sending planning gain money from the local communities in
England and Wales to disappear into the Treasury in London. When
the new legislation on planning gain was out to consultation, this writer suggested that planning
gain money stay in the local community for the common benefit of
all, as in Scotland, but he was the only person from the insurance
industry to respond to the consultation and his request was
refused. If the ABI had responded as well and had taken a firm
approach with government, perhaps there might have been a different
With these income streams, the Rowntree
approach starts to look feasible and equitable. A change
in the law would at a stroke remove both of the problems with the
Rowntree solution and be fairer to everyone. Funding would be
available to help reduce flood insurance premiums for all, not just
low income families. Not only that but it would be paid for by the
people who profit from putting vulnerable residents in high risk
locations in the first place and this would discourage the practice
in future. The subsidy fund could also make discretionary grants to
support insurance with rent schemes or to provide funds for
It does mean that planners employed by local authorities in
England and Wales would need to make additional claims on their
officials' indemnity professional liability policies. Irresponsible
local authorities would see their officials' indemnity premiums
increase and this in turn would impact on local council taxes.
At the end of the day, the local council taxpayer would fund the
liabilities as envisaged under the Morpeth
solution. The public would pay extra flood taxaccording to the
both the rateable value of their properties and the extent of
irresponsible planning decisions by their council in the past. This
would ultimately be reflected at the ballot box - especially if the
public realised that the flood tax was needed because of the greed
and incompetence on the part of their elected
members. However, the bulk of the costs would be borne by
irresponsible property developers and architects and this could
teach them to avoid flood plain development in future because their
professional indemnity insurer would forbid it.
The Crichton solution involves a five point plan as set out
- Remove the immunity against legal actions for negligent
misrepresentation. Apply legislation along the lines of s101(1) of
the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. This
should reduce the amount of new build in the flood plain and ensure
that those occupying new build in the flood plain do so knowing the
risks. By enabling insurers and flood survivors to recover their
costs from those experts who failed to warn of the risks or
misrepresented the location as being safe, premiums should rapidly
reduce to more affordable levels for new and recent build.
- Revise building regulations for new build along the lines
of the Scottish building standards to make properties more
resilient and resistant to flood damage. Enact legislation to make
the new building regulations apply retrospectively after flood or
storm damage so that the costs of resilient reinstatement are borne
by insurers and existing stock is made flood and storm resilient.
(The author has discussed this with senior managers from all the
major insurers and they are happy for this to go ahead as long as
there is the level playing field of legislation.)
- Create statutory duties on local authorities to clean and
maintain watercourses, gully pots, culverts, SuDS installations etc
at least once a year (as in Scotland) and make them legally liable
if they fail to do so adequately and a flood results (as in
- Require housing associations and public landlords to provide
automatic "free" insurance with rent cover on domestic contents
unless the tenant opts out. The premium would be built into the
rental figure. Opting out should not result in a reduced rental.
Such a scheme would avoid adverse selection and thus keep premiums
- Require all owners of reservoirs greater than 25,000 cubic
metres in volume to hold public liability insurance with a limit of
indemnity of at least £1m, and where people live or work in the dam
break danger zone, require reservoir owners to install transponders
for Permanent Scatterer Synthetic Aperture Radar Interferometry (PS
InSAR) monitoring of movement in dams or embankments. This should
detect sub millimeter movement and give early warning of failure,
and should both save lives and help to prevent premium increases
for the million-or-so people currently at risk of dam break floods.
Transponders cost less than £100 each.
None of these measures would require additional funding from the
taxpayer. Spending on cleaning and maintenance would be recovered
from reduced flood repair bills. Benefits are not limited to new
properties; even older properties should benefit because floods of
those properties are often due to flood plain development upstream
or a failure to clean watercourses. Owners or insurers of such
properties would therefore still be able to claim recovery of their
Knowledge of the flood hazard
It may be argued that the residents of flood hazard zones are
not aware they are at risk until they actually have a flood. This
is so even now they have access to flood maps on the Environment
Agency web site. The writer can understand this, having lived in a
town called Leagrave (i.e. the source of the River Lea) in an
estate called Marsh Farm. At the time despite the place names he
was oblivious to the flood risk and if asked would have assumed the
local planners would not have allowed the development if it was not
safe and that if he had been flooded he could have sued the
planners and developers for compensation. Of course he would have
been wrong. So even if the flood risk might be obvious from the
name of the area (see Image 2, for example,) this does not mean
that residents necessarily know of the risk until the flood occurs,
especially if the location has been negligently misrepresented as
being safe by the authorities.
Image 2: An area near Kingston upon
Hull which was badly flooded in 2007
(Copyright Crichton 2007).
Costs of flood damage
The cost of flood damage is often underestimated. Central
government has so far chosen to ignore the British National Flood
Insurance Claims Database, established with ABI assistance and now
perhaps the largest of its kind in the world, with data on
thousands of flood claims from the 25 leading UK insurers. Regular
analysis reports from the database enable insurers to accurately
model the cost of a flood depending on the depth, duration and type
of property affected.
Household insurance policies are underwritten on a particularly
generous basis in the UK. Buildings claims are settled on a
rebuilding costs basis and contents claims are settled on a "new
for old" basis. This basis is typically some 2.5 times more
expensive than the "economic loss" basis used by the Government in
England and Wales to calculate the benefits of a flood defence.
Commercial property claims are underwritten on an "indemnity"
basis which means they are subject to a much stricter application
of "average". This means the sum insured must adequately reflect
the value at risk, or the claims payment is reduced even for
Even shallow floods can cause massive insurance costs. Kingston
upon Hull was badly affected in June 2007 even though the flood was
not deep enough to cover the doorstep unless a vehicle created a
bow wave. (see Image 3).
Image 3: Flood damage in Hull
(Copyright Crichton 2007).
Examples of the results are shown in Table
4(even where the depth is below floor level, as in Hull in
2007, the insurance costs are significant). These figures are
extracted from the British Flood Insurance Claims Database.
||0 millimetre depth
||200 millimetre depth
||Where buildings sum insured is £150,000
Whole event insured losses in Hull in 2007 were estimated at
£1.5bn. Yet the flood losses in Hull (like most flood losses)
were entirely preventable. There were seven main causes:
- The houses had been built on the flood plain below sea level.
The area which suffered most is clearly marked as flood plain on
the 1924 Ordnance Survey map. Hull has the largest number of homes
on the floodplain of any UK city other than London. 95% of Hull is
below sea level. Planners should have realised this and at the very
least have insisted on the flood risk being taken into account in
the design, for example having the houses raised by a few steps.
Many of the older buildings in the centre of Hull are six or seven
steps above ground level.
- Most of the flooded houses have front gardens just the right
size for parking a car. Almost all of the occupiers had paved over
their front gardens with non porous paving or sealed monoblocks for
parking so the rainwater could not soak into the ground and just
ran off into the street. Planners should have insisted on porous
surfaces in gardens (they do now, but only for new build).
- The streets are narrow and drivers did not slow down in the
flood water, leading to large waves coming into the houses every
time a vehicle passed. The police and local media should have
spread the message of the dangers.
- Flood proof doors and windows were not fitted. Nor were any
demountable defences. This is down to individual householders,
although in Scotland local authorities often arrange discounts for
- The streets were lined with grass verges and trees meaning that
the drains were clogged up with grass cuttings and dead leaves.
Gully pots should have been opened up for cleaning at least once a
year and preferably again in the autumn.
- The gully pots in the streets had been partly tarred over in
road resurfacing work, indicating that their grills had not been
removed to clean the drains for a long time. (In Scotland gully
pots must be cleaned annually.)
- The original 1920s gully pots were still in place and are
totally undersized for current levels of rainfall. (see Image 4.) Gully pots should be replaced, ideally to
Scottish standards. (See Image 5.)
Image 4: A gully pot in Hull
(Copyright Crichton 2007).
The current standard for drainage in England is that it should
provide drainage for up to a 30-year return period event. By
contrast, in Norway the local authority and utility are held
legally liable for any surface water flood less extreme than the
100-year return period event thanks to the proactive approach by
Norwegian insurers who sued them and recovered their claims
payments (Lindholm et al, 2007). Perhaps UK insurers or flood
survivors should try this sometime?
Image 5: A gully pot in Scotland
(Copyright: Crichton 2012).
Resistance and resilience
It should be mentioned that it is not up to insurance companies
to dictate planning policy, simply to price the consequences.
Sometimes it makes sense to build in the flood plain because the
location is attractive to customers. In such cases the flood risk
can be minimised by sensible design and construction methods such
as flood-proof doors and windows, using the ground floor for car
parking, or even building on stilts (see Image
Image 6: A restaurant on stilts beside
the River Conwy in Llanrwst, North Wales
(Copyright Crichton 2010).
The "common enemy" rule
The historic "common enemy" rule permits the owner or occupier
of land to undertake protective works to prevent flooding of that
property, even if as a result the flood waters that would have
otherwise entered their land cause damage to another's property.
This means that if a neighbour or a property developer constructs
flood defences which cause your house to flood, you can do nothing
In the Arscott case, heavy rainfall in
October 1998 caused flooding near Aberfan to 32 homes to a depth of
a metre. They blamed the National Coal Board (the predecessor
of the Coal Authority) which had deposited colliery spoil on land
adjacent to the river which raised the land some 12 feet. The claim
was dismissed under the Common Enemy rule, another factor being
that the flooding was not a foreseeable consequence of the
infilling at the time that the work was done. For a more
detailed analysis, see Lowther: 2004.
However, while the common enemy rule allows individuals to
undertake measures to protect their own property, the Environment
Agency (EA) in England discourages such measures. Interestingly,
the EA in Wales seems to allow them and the Arscott case was a
Welsh one. Image 6 shows a property in Wales.
In Scotland both common law and SEPA allow individual flood
protection measures, and in some cases the local authority may be
obliged to take over the maintenance and repair of local flood
Thames lock keepers
During the 2007 floods, the EA's flood telemetry systems failed
in many places, and 23% of properties that were flooded from main
rivers did not receive flood warnings in time. The EA was severely
criticised for this by the Pitt Review. Hundreds of homes in
Oxfordshire and the Reading area were saved from flooding by the
quick actions of riverside lock and weir keepers to manage the
river flows. One of them was given a local hero award by Gordon
In November 2011, the EA announced that it was disposing of
resident lock keepers (so they could rent out their cottages) and
replacing them with the type of telemetry that failed in 2007. A
local MP, Martin Salter, has pointed out that even if the telemetry
works, emergency call-out costs would exceed any savings from this
move, and that hundreds of years of collective experience of the
river will be lost as lock keepers move away.
As a result, properties near the Thames will be at a much
higher risk of flooding in the future. The first areas to be
affected will be Grafton, Cleeve, Sunbury, Cherstey, Goring and
Whitchurch. It is suggested that underwriters carefully review
their approach for these areas.
Underwriting guidance for the flood insurance market after
What will insurers do when the 50-year old commitment to provide
flood insurance expires in 2013? This is still not known, but it is
likely that the major composite insurers will put together a scheme
which may not suit smaller niche players.
For the smaller insurer, there will be great opportunities to
attract low-risk business by taking the trouble to examine all the
underwriting factors - factors which are often ignored and little
understood by the majors. Location is just one example: the majors
tend to be focused on their geographic information systems (GIS) to
tell them which postcodes are high risk, but this can blind them to
other factors which a more responsive insurer could pick up; for
example, the Thames lock keepers issue mentioned above.
Sometimes a GIS can be more hindrance than help when it comes to
fine tuning. Insurers should also be aware of the tremendous
opportunities to obtain data using freedom of information
legislation. It is amazing what information can be found, free of
charge, just for the asking.
While location is not everything, it is important. Some
options are summarised in Tables 5 and 6, below. The options are intended to reflect the
planning approaches in different regions of England over the last
twenty years (see Table 2). It is logical that
where local planners have acted irresponsibly over the last twenty
years, insurers need to take punitive action rather than continue
to support their incompetence or greed with stealth subsidies. If
the relevant planning authorities agree to change their policies
and prove that they have done so then insurers could
Table 5: New business, provided no
flood claims in the last five years. Guidance for insurance
underwriters for individual risks
|Northern Ireland, Wales and Scottish areas other Moray and East
||A1. Low risk. Buildings constructed only in safe areas as per
the Insurance template. E.g. after 1995 (2004 in Wales)
||No change. Possible premium reductions as "stealth subsidy"
||A2. Buildings constructed in high-risk areas. E.g. before 1995
(2004 in Wales).
||High excess. Sue planners in Scotland
|Properties in England, Wales, Northern Ireland, Moray and East
||B1. England other than East Midlands, Humber, London, or
||Rate increases depending on risk.
||B2. High risk areas in Moray, East Midlands, Humber, London, or
||Total loss basis to be considered to enable floodplain
Table 6: Existing business renewal
terms for individuals
Risk which have had a flood claim in the last five years should
be rated at one category higher for each claim. Possible options
depending on risk.
|Risk Return Period (years)
||Category and Underwriting action.
|200 to 1,000
||C1. Strictly apply "average"
|100 to 200
||C2. Change cover to indemnity basis and strictly apply
"average". Exclude cover for basements. Require flood-proof doors
and windows etc.
|50 to 100
||C3. Change cover to indemnity basis and strictly apply
"average". Exclude flood cover for basements and ground floor
rooms. Require flood proof doors and windows etc.
|75 to 100
||C4. Change to "first loss" basis of cover
|50 to 75
||C5. Change to a parametric or "benefit" basis of cover
|0 to 20
||C6. Refer to a bookmaker for a gaming contract on a benefit
More detailed information
Group A. New business in Northern Ireland, Wales, and
Scottish areas other than Moray and East Lothian -
individuals. Insurers can afford to be very
selective about new business and are likely to be attracted
to areas which have used FLAGs or other means to manage their
flood risks with insurance advice since 1995 (2004 in Wales, 2006
in Northern Ireland). Flood is now well controlled in these areas,
especially compared to England (see Table 7).
- Category A1: Low risk. Buildings constructed
in safe areas e.g. after 1995. (2004 in Wales, 2006 in Northern
Ireland). No change. Low cost insurance readily available. Possible
reductions as stealth subsidy disappears.
- Category A2: Buildings constructed in high
risk areas e.g. before 1995. Increase the flood excess
substantially, especially after a flood claim.
Unfortunately a high excess provides a strong incentive for
policy-holders to exaggerate the claims cost and commit fraud to
cover the cost of the excess. It also reduces any incentive to
Insurers should provide advice and risk surveys to implement
resistance and resilience measures and agree amongst themselves to
encourage resilient reinstatement and lobby the Scottish Government
to implement the retrospective resilient reinstatement section of
the Scottish Building Standards Act. They should also encourage
self help groups and volunteer flood wardens to help councils to
monitor and maintain watercourses.
In Scotland, insurers and loss adjusters should aggressively sue
planners, architects and developers and encourage policyholders to
do the same to recover the costs of the excesses.
Group B: New business for properties in England, Moray
and East Lothian - individuals. This type of new business
will be much less attractive than group A, above. So long as
planners and developers have legal immunity from actions to recover
flood damage, this business will tend to be considered on an
accommodataion basis only.
- Category B1: England other than East Midlands,
Humber, London, or Yorkshire. Abolish subsidies and charge the full
technical rate for high-hazard properties. This will make the true
risk more transparent and may prompt government action.
If the UK Government seek the re-introduction of stealth subsidies
this should be strongly resisted, as it only encourages flood plain
development. It is also likely to be particularly strongly resisted
in Scotland, which has been paying a disproportionate share of the
subsidy for the last 50 years. Rate increases depending on
- Category B2: High-risk areas in Moray, East
Midlands, Humber, London, or Yorkshire. These are areas where the
planners are still allowing a large proportion of new build in
flood hazard areas (see Table 2).
In order to correct these actions, insurers should insist that
cover be issued on a total loss basis at an appropriate premium in
high flood hazard areas. This means that if the flood exceeds a set
depth the insurer buys the property at market value and then
demolishes it. The insurer should then retain ownership of the land
in perpetuity to prevent rebuilding. Alternatively, it could build
a block of flats, with the ground floor used only for parking and
Another solution would be that, on the periphery of the flood-risk
area, the land could be sold subject to a restrictive covenant that
it will not be used for ground floor housing. In the long term,
this could operate to restore floodplains and remove people from
risk, but very high premiums would be required in the short term
without government support. Many would not be able to afford the
high premium and would be forced to go without insurance. Unless
they could afford to repair their property after a flood, they may
have to abandon it.
Either way, this should lead to blight or a movement away from
flood hazard areas. Such a situation may encourage government and
planners to take action in these regions. In Scotland, planners and
developers could be sued to recover flood damage and encourage them
to be more careful in future.
Group C: Existing business - individuals.
Insurers will still wish to retain existing business especially
where the policyholder has been loyal to the same insurer for a
number of years. Rather than dealing with such business solely by
the use of premium increases and high excesses, insurers should
treat each case on its merits.
In England, often the cause of the flood loss is not the
location of the property insured, but the reduction in flood
storage upstream due to development of agricultural land drainage,
or the failure to clean watercourses or gully pots. Community
action groups can make a difference here. For example, in Scotland
community action groups have exerted peer pressure on farmers to
fill in their field drains and let their fields flood. Individuals
should shop around until they find insurers who recognise what they
are doing to reduce risk.
The following proposals involve some alternative solutions. Some
of these would require the insurance regulator's agreement.
Risks which have had a flood claim in the last five years should
be rated at one category higher for each claim. The following
options are in addition to increases in premium. Any claims costs
in Scotland should be recovered by legal action against the local
planning officer, and if possible the architect and developer.
- Category C1: 200 to 1,000-year return period
probability. Apply average to future household claims.
"Average" means that policyholders who try to save money by having
inadequate sums insured suffer from reduced claims payments.
- Category C2: 100 to 200-year return period.
Decline to issue any property damage cover to homes or businesses
without local flood protection such as flood proof doors and
windows and demountable defences (see Image 7).
Demountables are less attractive because there is no guarantee that
they will be deployed in time. Exclude cover for the contents of
basements. If this is not possible, decline renewal.
Image 7: demountable flood defences in
(Copyright Crichton 2010).
- Category C3: 50 to 100-year return period.
Exclude flood cover for commercial property risks and seek
authority from the Financial Services Authority to exclude flood
cover for personal property contents of ground floor or basement
rooms. If this is not possible, decline renewal.
- Category C4: 20 to 50-year return period.
Discontinue underwriting policies in the highest hazard areas on an
indemnity basis. Instead offer a first loss policy where the
insurer would pay up to the sum insured or the extent of the loss,
whichever is less. This would encourage the policy-holder to move
property out of the way of the flood and to deploy demountable
defences or to abandon the property altogether.
- Category C5: 20 to 50-year return period.
Issue cover in high hazard zones on a benefit basis similar to
personal accident insurance. Again the policy-holder would choose
what level of cover was required in advance. if the policy-holders
choose, say, a benefit of £10,000, in the event of a flood to a
specified depth, proved by photographs or tide marks or an
Environment Agency report, the insurer would pay out a flat sum of
£10,000 right away, which the policy-holders could spend in any way
they wished. The sum might be more than the cost of the damage or
it might be less. This would enable speedy claims settlement and
encourage the policy-holder to move property away from the flood in
time, or salvage and reuse as much property as possible, fit flood
proof doors and windows or to deploy demountable defences.
- Category C6: <20-year return period. Not
insurable because losses are inevitable. Encourage resident to
consider arranging a gaming contract with a local bookmaker for
household contents as the probability of loss is too high for an
insurance company. This would operate in the same way as a benefit
Insurance companies could work with licensed bookmakers to provide
flood insurance from their retail outlets on a weekly premium
basis. Many of the busiest of these outlets are located in low
income social housing estates which are also likely to be the most
vulnerable locations. In such locations the local "bookie" is
likely to be more trusted than a distant insurance company or
broker. Bookies are experienced risk professionals and could easily
be trained to assess flood risks and measures to be taken to reduce
them, such as demountable defences. Their on-the-spot local
knowledge and ability to assess the probabilities of high-risk
events could be a valuable asset. The insurance company could
reinsure the risk with the bookmaker or the bookmaker could
underwrite the risk directly.
Group D: Insurance with rent schemes for social housing
tenants - groups.
This group is often comprised of low income vulnerable people
who are living in flood risk areas not from choice but from
necessity. Often they will be reluctant to pay for household
contents insurance, but without it they will be much less resilient
to floods or storms.
The proposal is that household contents insurance be provided free
of charge to all tenants so long as the rental payments are
up-to-date. The sum insured would be a multiple of the amount of
rent paid, but higher sums insured could be provided for additional
premium. Tenants could opt out of the insurance (for example, on
religious grounds) but would receive no discounts on their rent as
the insurance is "free". Not all tenants would be acceptable; for
example, those with criminal convictions or drug addicts.
Schemes would be arranged with insurance companies by landlords
who would have to pay the premiums. Landlords would need to adjust
their rents accordingly. However, by removing adverse selection
almost entirely and achieving high business volumes, unit costs
would be relatively low. The insurance regulator might even agree
to the provision of a mini-policy which operates on an indemnity or
benefits basis, rather than new for old, thus saving costs
Ideally such schemes should be subsidised by the Government for
people on welfare benefits.
Group E: Small and medium-sized enterprises
AXA International Small Business Report: Obstacles to Growth in
2012 (published in November 2011) shows that in the UK:
- 73% of SMEs have insurance on their business property;
- 80% have a contents insurance policy.
However, the report also showed that only 39% claimed to have
business interruption cover to protect against lost income
resulting from unforeseen events
The AXA survey also looked at SMEs in a number of countries, and
found that overall, 40% of SMEs do not currently have a business
continuity plan. This rises to 59% of sole traders and 47% of
micro-businesses (those employing fewer than 10 people).
Continuity planning is least common among firms in the UK,
Poland, Germany and the US. Typically, SMEs simply think that they
are too small to think about continuity planning. 36% of those with
no plans agreed with the statement "my business is too small" while
28% did not see the need to make a plan.
SMEs often have little choice about the location of their
premises. They have to be where their customers are. Not enough
attention is paid to the importance of SMEs in providing local
employment and social cohesion. The corner shop, the pub, the
hairdresser etc are all important places for people to meet and
chat. If they go, then blight is likely to follow. Without business
interruption insurance, and continuity planning, SMEs are
particularly vulnerable to flood risks.
The insurance regulator gives insurers have much more freedom of
action with SMEs. Any of the options listed above could be
Differences between England and Scotland
Table 7 is an attempt to show some of the
ways in which, from an insurance point of view, it appears that
Scotland may have a different flood risk than England. Rainfall
levels in Scotland in 2011 were the highest for over a hundred
years yet there were no major floods reported.
This table is not intended to be prescriptive - each country is
working under very different circumstances, so different solutions
are inevitable. However, it is hoped that this table might
stimulate some debate.
A: Exposure and planning
Planning Policy (see also Table 1)
11% of all new buildings have been allowed in the floodplain
between 2000 and 2005 (TSO: 2006). PPS25 allows
building in flood hazard areas if nowhere else available
Negligible building in floodplain since 1995. SPP7 forbids building residential property in
areas where the flood risk exceeds the 200-year return period
Direct involvement of local communities and local knowledge
No system for planners to consult with insurers or other key
stakeholders ( White et al : 2007) No system for
consultations on a catchment wide basis.
Until 2011, planners were obliged by law to set up Flood Liaison
and Advice Groups (FLAGs) for dialogue with key stakeholders,
including insurers and adjoining local authorities (SPP7) If developers are asked to commission
hydrologist reports, they are archived and made available to FLAG
members. Almost all Scottish councils, covering 94% of the
population, established FLAGs with insurance representation.
Although no longer compulsory, they have achieved their purposes
and many still operate.
Can flood survivors take legal action against planners under
common law for allowing floodplain development?
No (Ryeford Homes Ltd v Sevenoaks District
Yes (Hedley Byrne v Heller 1963 ) This
gives an added incentive to refuse development in flood hazard
areas and consult on flood defence proposals
Housing density and population density (high density means more
pressure to build in the floodplain)
Average 40 dwellings per hectare for new developments. Thames
Gateway floodplain will have up to 200 dwellings per hectare.
Average population density: 383 per square kilometre
30 dwellings per hectare are considered high density. Average
population density: 64 per square kilometre
Published flood maps
River, estuary and coastal flood, modelled and historic,
excluding combined effects
As for England but including combined effects. Drift geology
maps show glacier paths and can act as a proxy for very extreme
events. Draft maps published in June 2011, which include surface
water flood and vulnerability data
Maps of areas at risk from reservoir failure (insurers will be
able to use these maps to assess flood risks, which may affect
Secret even from the police on the grounds of national security
until 2011 (the police in England were apparently regarded as a
security risk). Publication now under way, but no area as yet has
proper dam-break contingency plans
Freely available to emergency planners, police and rescue
services since January 2008, so that contingency plans can be drawn
up. Full publication to start in 2012 (Crichton:
B: Vulnerability: social justice, financial inclusion
and human welfare issues
Published comprehensive record of injury and property damage
caused by all flood events and action taken
No formal systems
All non-agricultural flood events, no matter how small, must be
recorded by local authorities and details published every two
years, along with action taken or proposed to prevent a recurrence
- valuable information source for insurers
Social housing and "pay with rent"-type contents insurance
schemes. The social impacts of flooding are severe, especially
No action to encourage insurance schemes. Sample surveys show a
range of 34-44% average take-up of insurance for social tenants (Vestri: 2007). Now unlikely to increase as
insurers are reluctant to accept new business in flood hazard
Following £400,000 spend by the Scottish Government on promoting
pay with rent schemes, the Scottish Housing Survey of 2007 shows
that, overall, 64% of people in the most deprived 15% of areas of
Scotland had home contents insurance, compared with an average of
89% for the rest of Scotland
The Index of Multiple Deprivation produced by the Office for
National Statistics is at electoral ward level and ranks electoral
wards based on an assessment of a mix of economic indicators.
Boundaries are incompatible with the post code system
The Scottish Index of Multiple Deprivation is calculated at a
much higher resolution than England. Scottish "data zones" average
only 200 houses and are similar in size to Census Enumeration
Districts. Boundaries coincide with the postcode system and so can
be used with data from credit referencing agencies
Target lists for evacuation of vulnerable people
No action known
Many emergency planning officers have established lists of
people requiring special assistance for evacuation
No legal obligation to rescue flood victims. The Chief Fire
Officers Association in England and Wales says: "The UK
[meaning England and Wales] simply does not currently have the
capability to respond to a major flood event." Many areas do
not have trained personnel or appropriate equipment for flood
Statutory duty for fire and rescue services to provide flood
rescue cover. Senior officers regularly attend FLAGs and discuss
issues with insurers and other stakeholders. There are also 14
well-trained and fully equipped specialist rescue teams across
Scotland, with rescue boats, pumps, buoyancy aids, survival suits,
Population issues and social cohesion. Immigrants and ethnic
minorities can be especially vulnerable to flood owing to language
and cultural differences
England's population expected to increase from 51.5 million in
2008 to 60.7 million by 2033 according to Office for National
Statistics figures published in March 2010. A
significant proportion of this increase will be driven by
In Scotland, where the birth rate has reached a 13-year high,
the population still expected to increase only from 5.1 million to
5.4 million by 2031
Advice and support for flood victims' families and flood
"National" Flood Forum only applies to England and Wales and
receives no government funding
Scottish Flood Forum, funded by the Scottish Government
C: Hazard - sustainable flood management
Sustainable flood management (SFM)
No legal requirement. Single demonstration project in Ripon
discontinued in 2007 due to lack of funding. New scheme started
Pickering in 2010. Some local floodplain restoration now taking
place, but not co-ordinated
Required under primary legislation. Major natural flood
management demonstration projects have been running for some years.
In a current EU-funded research project, Scotland has been held
upas an example to the rest of Europe for its work on making cities
more resilient using SFM (Department of Public
Works and Water Management : 2010). Scottish Rural Development
Grants available to landowners to store water in times of flooding
to reduce flooding downstream
Water Framework Directive
Adaptation of rivers and lakes to cope with increased rainfall
from climate change and thus reduce flooding risks is forbidden.
Transposed subject to sustainable flood
management requirements.This means that rivers and lochs can be
adapted to cope with increased rainfall (Scotland is the only
country in the EU to do this)
Cleaning watercourses of weeds and rubbish (EU Waste Directive
means cut backs in refuse collection)
No statutory duty and no funding for cleaning watercourses.
Habitats Directive and Birds Directive often used as reasons for
inaction. Fly-tipping into watercourses now widespread
Statutory duty on local authorities to regularly clean
watercourses with central grant funding. Falkirk council now cleans
some watercourses on a weekly basis owing to fly-tipping
Land drainage - such schemes often increase the flood risk
5 million hectares drained by 1900. Since accelerated by the
wars and farming subsidies. Land drainage still takes place
Figures not available, but Scottish topography is generally less
suitable for major land drainage. Land drainage schemes terminated
in Scotland in 1997
Sewage and surface water drainage (EU Waste Directive means more
waste such as cooking oil, nappies, "wet wipes", etc. flushed into
sewers, leading to blockages. Roads drain into gully pots, which
can be blocked by leaves, grass cuttings, and winter road
The householder has a right to be connected to public sewers
under Section 106 of the Water Industry Act 1991, even if the sewer
has insufficient capacity. At present some 20,000 households at
risk of sewer flooding once in a ten-year period. Professor Howarth
points to a "concerning decline" in the level of performance in
respect of pollution incidents involving water companies in England
and Wales (Howarth: 2004). When Hull was
flooded in 2007, it was found that street gully pots were
undersized and had been partly tarred over by old road surfacing
work, showing they had not been opened for cleaning for a long
New developments not allowed if the sewage or water supply
systems do not have surplus capacity. Scottish Water will not
sanction any new developments where surface water drains into
watercourses unless the relevant local authority accepts
responsibility for the additional discharge, and presumably any
flooding and legal liability which might result. Hence the almost
universal use of sustainable drainage systems to reduce the risk of
storm water overloading sewers or rivers. Street gully pots opened
and cleaned annually
Sustainable drainage systems (SUDS)
Not always used owing to uncertainty over ownership or
responsibility issues. Anecdotal evidence of inappropriate systems
which can increase flood risk. The EA regards SUDS as having a
number of applications, including flood management
Considered for every new development. FLAGs have been invaluable
in spreading best practice - one has produced award-winning
national guidance in consultation with insurers on drainage impact
assessments (Aberdeenshire Council : 2002).
SEPA regards SUDs primarily as ameans of controlling diffuse
pollution, rather than an element offlood management because SUDSis
of limited value against floods
Sustainable drainage systems (maintenance)
No maintenance standards or agreement on who will maintain
Statutory provision for Scottish Water to set standards for SUDS
and to adopt and maintain
||Flooding from agricultural land
||No action taken to prevent
||Local authorities have the power to require farmers to prevent
mud escaping from fields onto roads - by contour ploughing on
slopes (where safe), not ploughing to the edge of low-lying fields,
and by planting hedges and building embankments
||Fully privatised. Emphasis on capital developments to add value
for shareholders rather than on maintenance work to reduce leaks
and sewage spillages
||Publicly owned Scottish Water has additional responsibilities
such as the maintenance of SUDS and provision of temporary
demountable flood defences pending upgrades on sewage works. Since
devolution, leakage has been reduced by more than one-third
||One of the main ways to reduce flood hazard naturally is to
plant woodland upstream of populated areas in the catchment
||Percentage of the population with access to over 2 hectares of
woodland within 500 metres of their home: England 15%; Wales 18%;
Northern Ireland 7% (Woodland Trust:
||Percentage of the population have access to over 2 hectares of
woodland within 500 metres of their home: 28% (Woodland Trust: 2010).
D: Hazard - flood defences
Detailed information on flood defences
Not readily available
The Scottish Flood Defence Asset Database shows type, standard
of protection, and area protected. Available online to members of
FLAGs and hydrologists (Bassett et al :
Minimum standard of service for new flood defences
No minimum standard outside the centre of London
100-year return period plus climatechange allowance (Scottish Executive: 1997). Effect of the latter is
the equivalent of designingfor the 200-year return period or better
(Bassett et al : 2007).
Cost-benefit assessment for grant aid for flood defences
Spending on flood defences is rationed by a "priority scoring"
method. This method means that the benefits have to be at least six
times the costs to justify a scheme. There can be delays of many
years before a scheme is built. Often, schemes only protect against
small-scale floods, and are poorly maintained. In practice benefits
have had to be seven times costs for recent projects. Proposals for
a new system were set out for consultation in November 2010 (DEFRA, 2010). Treasury rules require the economic
appraisal to consider only economic losses and not financial
losses. This has the effect of rationing grants for flood defences.
Financial (or "real") losses are around 2.5 times higher than
economic losses. For example, economic losses assume that if a
householder's ten-year-old carpet has to be replaced, he will have
to find another ten-year-old carpet, or if there are two
supermarkets in the town and one is flooded, the economic loss is
zero because people can go to the other one.
Benefits must exceed costs. In England benefits are based on
estimated losses to the local economy. In Scotland, calculations
can be based on actual financial loss data. Tables of average costs
for different flood depths and types of property are calculated
from many thousands of British flood claims from 25 leading
insurers since 1993. The British Flood Insurance Claims Database
(see Table 4) is the biggest database in the
world on flood damage costs and results in benefits some 2.5 times
higher than the English method (Black, Evans :
Authority to build flood defences
Around 600 separate bodies, under the general supervision of the
Environment Agency (EA). Planners and elected councillors have no
need to worry about finding the money for flood defences so they
have no disincentive to allow developments in hazard zones
Only the local authority and relevant riparian owners.
Discourages planners from floodplain development because they know
their council will have the problems and costs of defending it and
will be democratically accountable
Completing of flood defences
No target for completion. New buildings are being constructed in
hazardous areas faster than defences can be built
Targets announced for the completion of flood defences for the
100-year return period event by 2008 for both river and coastal
floods (Scottish Executive: 2005). Climate
change is taken into account
Condition of flood defences
According to the National Audit Office, only 61% of flood
defence structures in England and Wales are in "good" condition or
better, and an extra £150 million needs to be spent each year just
on maintenance (National Audit Office,
An independent survey in 2007 of flood prevention schemes shows
the schemes provide over 90 kilometres of assets including 35
kilometres of embankments, 21 kilometres of walls, 16 kilometres of
culverts and 18 kilometres of channel improvements. Of assets
surveyed, 87% are in "good" and "very good" condition, and a number
of the rest could readily beimproved through maintenance
improvements (Bassett et al : 2007).
Annual average flood defence spend per household at risk
£219. Spending per capita in England is higher than in Scotland,
but there are 5.2 million properties at risk in England compared
with Scotland's 99,000
E: Hazard - flooding caused by storm
Sea levels are rising, thus increasing the risk of flooding from
storm surge. In 1999, a five-metre storm surge was recorded in the
More low-lying coastal areas. Land south of a line from Dundee
to Abersoch is sinking in response to tectonic uplift north of that
line. For example, Lowestoft mean sea-level rise is 2.57
Glacio-isostatic uplift is taking place due to the land
recovering from glacier weight. Although this rate is declining, it
has partially compensated for sea level rise. For example, Aberdeen
mean sealevel rise is 0.87 millimetres/year
Percentage of coastline subject to coastal erosion due to
geological factors, making them vulnerable to flooding
A major climate change model ("PRUDENCE") suggests that storm
tracks could move south of 55 degrees latitude
Carlisle is approximately 55 degrees latitude
Scotland suffered from a storm in 1993 which broke the European
record for low atmospheric pressure at 912 millibars (followed by
the 1993 Tay floods). Since then, major storms in 1999, 2005 and
2007 have mainly affected England and Wales
In the Building Regulations for England and Wales currently set,
some provisions for flood mitigation in Approved Documents C, H and
J. Approved Document C provides practical guidance on site
preparation and resisting contaminants and moisture, but does not
provide information on preventing or reducing the impacts of
flooding. Approved Document H provides practical information on
drainage and waste disposal and deals with mitigation of flood risk
associated with the surcharge of drains and sewers. Approved
Document J identifies the need for secondary containment where
there is a significant risk of oil pollution, but does not contain
recommendations for ensuring storage above the predicted flood
Building Standards deal with mitigating damage to buildings and
removing threats to the healthand safety of occupants as a result
of flooding. Guidance is given on the use of building materials not
adversely affected by flood water. The Scottish Building Research
establishment is expert in testing new materials for flood
resilience and techniquesin resilient repairs. Scottish primary
legislation on Building Standards already includes provisions which
would allow for resilient standards to be made retrospective after
flood or storm damage, as already happens with fire precautions. A
compulsory resilient reinstatement would be an excellent first move
to adaptingexisting building stock to be less vulnerable to future
Reservoir safety enforcement
EA - owns 169 reservoirs itself (a possible conflict of
interest?) (Crichton: 2011b)
SEPA - does not own reservoirs itself. The Scottish Parliament
recommended compulsory public liability insurance for reservoir
owners, but certain London insurers objected owing to their
ignorance of Scottish legal principles and their lack of experience
in underwriting such risks. Such a move could have dramatically
improved Scottish safety standards, at no cost to the taxpayer.
Similar moves would be difficult to implement in England because of
different legal precedents
Reservoir safety inspection threshold
Compulsory for reservoirs greater than 25,000 cubic metres in
Compulsory for reservoirs greater than 10,000 cubic metres in
volume. (Reservoirs (Scotland) Act 2011)
Communications in an emergency
No special treatment
Planning policy specifies that mobile phone base stations and
electricity sub-stations be located in such a way that they cannot
be disabled by flood events (SPP7)
Waterborne pathogens. Between 1993 and 2003, there were over
4,000 cases of waterborne disease in Britain, half of which
No controls known
Statutory controls and monitoring. Cryptosporidium and E. coli
were found in only 14 of Scotland's 32 council areas in 2004
||Following the Strategic Environmental
Assessment Directive the person commissioning a plan or
programme which is likely to have environmental impacts must
produce an Environmental Assessment
||No requirement in England and Wales to produce a strategic
flood risk assessment. Although was proposed in December 2005 in
draft planning guidelines for PPS25, this did not appear in the
||In Scotland, insurers can claim damages from a local authority
if they fail in their obligation to undertake a strategic flood
||Legislation to transpose the Floods Directive7
||New powers and duties for local authorities and the EA in
response to the Pitt Review and the Floods Directive, but reduced
funding will limit their effectiveness
||Emphasis on co-ordination, co-operation and the involvement of
stakeholders and public
||Use of "Planning gain" - the sums of money paid by developers
out of the profits they make for the increase in land value created
by gaining planning permission.
||This goes straight to the Treasury and does not benefit the
local community (TSO: 2006). This money should
really be used to contribute to the costs of insuring properties in
flood risk areas.
||Planning gain stays within the local community and is used to
improve community facilities such as schools, community centres
etc. It is administered by the community council. If there were any
properties at risk of flood, the money could be used to help the
people living in them.
||Use of buy-out and relocate schemes to restore the
||No examples known.
||Large numbers of recently built business and residential
properties at risk are being bought by Moray Council and
demolished, because that is cheaper than defending them.
Public health impacts of flood
Last, but certainly not least, a reminder of the impacts of
flooding on mental and physical health. Table 8, below shows only
the immediate effects. Also to be taken into account is the fact
that risks are increased by the spread of waterborne pathogens and
Table 8: Percentage of flood survivors reporting health effects
|Stiffness in joints
||Anxiety during rain
|High blood pressure
|Sprains / strains
|No physical effects
||No mental effects
Source: extracts from a table produced by Prof. Dennis
Parker, Middlesex Flood Hazard Research Centre
Zoonoses are diseases or conditions that can be passed from
vertebrate animals to humans.These can vary from country to
country. Some countries have diseases such as rabies or heartworm
disease, both absent in the UK (so far).
In the UK, floods can release anthrax from the soil; urine from
dogs, cattle and rats can spread Weil's disease. Council cut-backs
on rubbish collection are blamed on the EU Waste Directive and have
been followed by a sharp increase in call outs to deal with rat
infestations. A leading pest control firm claimed in 2008 that
call-outs for rodents had increased by 18% in one year in Scotland,
and one local authority claims a 50% increase in the Scottish
There are well over five million rats in England alone, with
nearly two percent of properties affected. There are no official
figures for the UK's rat population and estimates range from 15m to
100m. A single pair of rats can produce up to 2,000 offspring in a
year. Flood survivors often have to share higher ground with packs
of fleeing, hungry rats and rat bites during a flood event are
increasingly common, especially amongst children.
"Pay as you throw" schemes are leading to increased fly tipping
which is producing food sources for rats, urban foxes, seagulls and
other wildlife. Falkirk council in Scotland has reported that in
some areas watercourses now have to be cleared of rubbish on a
weekly basis due to fly tipping. Local authorities in Scotland have
a statutory duty to clear watercourses, but not in England and
Wales where fly tipping could lead to an increased flood risk.
Birds such as seagulls and pigeons foraging for food could spread
Animals and birds exposed to flood water, hazardous materials,
diseases, parasites, or toxins can cause a risk to humans. Pets are
often passed among rescuers or cuddled by children.
There are a number of zoonoses found in the UK, for example:
- coliform bacteria;
- borreliosis (also called Lyme disease) from tick bites;
- tick-borne encephalitis (TBE);
- amyotrophic Lateral Sclerosis (ALS motor neuron disease);
- Weil's disease and dog or cattle leptospirosis;
- bovine spongiform encephalopathy (BSE);
- Creutzfeldt-Jakob Disease (vCJD).
Waterborne pathogens (see Table 9)
Flooding events can spread pathogens from soil into watercourses
and reservoirs and subsequently into water supplies especially in
warm weather. Organic farming could lead to more E Coli in the
soil. Cut-backs in refuse collection can lead to more items being
flushed down the toilet, leading to sewage pipe blockages and raw
sewage overflows. Sustainable drainage systems are standard in
Scotland, with maintenance responsibilities specified in
legislation. These systems can alleviate flooding and pollution,
but maintenance responsibilities in England and Wales are
Pathogens from overflowing sewers, slaughterhouse waste, animal
urine/faeces or the bodies of dead animals can cause contamination
of water supplies - sometimes with fatal results.
Cryptosporidium parvus in particular is not destroyed by normal
water treatment or sewage treatment plants. An outbreak in
Milwaukee, Wisconsin in the USA in 1993 made 400,000 people ill and
more than 100 died. Possible sources include cattle along the two
rivers that flow into the Milwaukee harbour above the water
treatment plant, local slaughterhouses and human sewage. Rivers
swelled by significant rain and snow runoff could have spread the
pathogens for long distances.
Morris states that between 1993 and 2003 there were 4,000
officially recorded incidents of waterborne disease in Britain and
that half of these were caused by cryptosporidium. More recent
figures are not known, and there is a need for legislation to
enforce greater control and monitoring of pathogens. Such
legislation has already been passed in Scotland.
Waterborne pathogens can also develop in standing water such as
in gully pots, or stagnant water. "Low flow" toilets can reduce the
speed of flow in sewers and if it reduces below 600mm per second,
then pathogens can develop in sewers, ready to be brought to the
surface during a flood.
Table 9: Examples of waterborne pathogens found in the UK
Salmonella typhi / paratyphi
|Hepatitis A and E
The high incidence of gastro intestinal conditions amongst flood
survivors should be of particular concern (see Table 8).
Unfortunately the practice of using sandbags during a flood event
is still common, and children can often be seen playing in the
flood waters or the sand. After a flood, sandbags are contaminated
and should be disposed of quickly and safely. Often this does not
happen. It is much better to use well-engineered temporary flood
defences which can later be cleaned properly.
England faces some difficult problems owing to high population
density, immigration, and a concentration of population in the
low-lying flat areas of the South East.
Land-use planners in the South East are often faced with
situations where demand for housing cannot be satisfied without
resorting to flood hazard areas. In such cases the answer may be
more resilient building regulations as in Scotland. Even better
would be to make these retrospective after a flood or storm so
existing building stock can be made more resilient.
Given the UK Government's failure to take action to control the
development of flood hazard areas or apply resilient building
regulations in England, it would surely be no surprise if the
insurance industry were to apply punitive economic measures to
force more responsible behaviour and avoid the needless exposure of
millions of people to the risks of flooding.
The UK Government appears to be happy to pander to the profit
motives of property developers and ignore the suffering of people
who cannot escape from the hazard zones owing to loss of equity
from big increases in insurance costs, if cover is available at
all. Firm action by insurers could make the consequences of
irresponsible planning decisions more transparent. However, this
would require strong leadership within the industry, something
which is clearly missing.
It is not the job of insurers to subsidise flood plain
developments and if government wishes to do so in order to support
the profits of property developers and contractors who make large
donations to political parties that is up to them and, ultimately,
the electorate. However, they should understand that such action
will simply have the effect of putting more vulnerable people at
risk of flooding.
Sooner or later, drastic measures may be needed; especially
after the UK insurance commitments end in 2013. The UK Government
could mitigate the transitional effects - perhaps a
government-funded insurance scheme for those on social security
benefits, a campaign to make homes flood-proof, or a "buy-out and
relocation" scheme for the highest risks, as in the USA and
At the very least, some moves towards sustainable flood
management, resilient building regulations, and training of
architects in adapting housing design for flood and storm risks
would be sensible, but most important of all would be a change in
the law to hold to account those planners, architects,
hydrologists, landlords, and property developers who are
responsible for placing vulnerable people in high-risk locations in
the first place.
Recommendations for Government
- Remove the immunity against legal actions for negligent
misrepresentation. Apply legislation along the lines of s101(1) of
the Law Reform (Miscellaneous Provisions) (Scotland) Act
1985. This would need to be combined with a readiness of
insurers to go to court to recover their flood losses.
- Amend the building regulations for new build to make properties
more resilient and resistant to flood damage and implement new
legislation to make the new building regulations apply
retrospectively after flood or storm damage so that the costs of
resilient reinstatement are borne by insurers and existing stock is
made flood and storm resilient.
- Accept data from the British Flood Insurance Claims Database in
cost benefit appraisals for new flood risk management schemes. This
is now the biggest database of its kind in the world.
- Require any new flood risk management schemes to include an
element of flood attenuation using natural flood management
measures, such as removal of agricultural land drainage and
agricultural flood protection measures.
- Require housing associations and public landlords to provide
automatic "free" insurance with rent cover on domestic contents
unless the tenant opts out. the premium would be built into the
rental figure. Opting out should not result in a reduced
- Require all owners of reservoirs greater than 25,000 cubic
metres in volume to hold public liability insurance with a limit of
indemnity of at least £1m; and where people live or work in dam
break danger zones require them to install transponders for
permanent scatterer synthetic aperture radar Interferometry (PS
InSAR) to enable continuous monitoring for subsidence, landslip, or
collapse by the EA or SEPA.
None of these measures would require funding from the taxpayer.
The first measure should reduce the amount of new build in the
flood plain and ensure that those occupying new build in the flood
plain do so knowing the risks. The second measure should reduce
damage to such properties and the retrospective rules could
gradually improve resilience in existing stock. The other
suggestions are self explanatory.
M Pitt (2009).
Lessons from the 2007 floods. An independent review. Pitt
Review Report. The Stationery Office, 2009.
D Crichton (2011). "Flood risk
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I White, J Richards and J Carter
(2007). Flood risk management policy issues v2 :
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B Cook (2010). The flood
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D Crichton (1998)."The insurance
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European Commission (2009). Floods
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Board of Trustees of the Tate Gallery
v Duffy Construction Ltd and another  EWHC 361.
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Floods" Chicago: University of Chicago Department of Geography,
Research Paper No. 29, 1942, published 1945.
J O'Neill and M O'Neill
(2012). Social justice and the future of flood
insurance. Joseph Rowntree Foundation.
Ryeford Homes Ltd v Sevenoaks
District Council  2 EGLR 281.
Hedley Byrne v Heller 1963 
AC 465,  2 All ER 575,  3 WLR 101. (Although this was
an English case, the Law Reform (Miscellaneous Provisions)
(Scotland) Act 1985 s101(1) adopted the decision into statute in
Scotland and declared that damages are recoverable in respect of
negligent misrepresentation. This means that the Hedley Byrne
position still stands in Scotland, despite subsequent English case
law which has reversed it for planning authorities.)
Arscott and others v The Coal
Authority and others (2004). EWCA Civ 892 Court of Appeal, 13
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neighbour: the application of the "common enemy" defence in
circumstances of nuisance by flooding". The journal of water
law, v15(6), pp 249-252.
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The Directive has been transposed
into English law by three Statutory Instruments, the main one being
SI 2003 no 3242 (The Water Environment (Water Framework Directive)
(England and Wales) Regulations 2003) which came into effect on 2
January 2004. A further two SIs deal with cross-border river basin
districts. As far as "flood" is concerned, it is only mentioned
once in each of these sets of regulations, which simply impose a
duty to "consult" those who, in the opinion of the relevant agency,
"have an interest in the promotion of flood management". So far, no
insurers have been consulted (so far as the author is aware).
The Scottish Parliament considered
the Directive so important that, instead of statutory instruments,
primary legislation to transpose the Directive was enacted in the
form of the Water Environment and Water Services (Scotland) Act
2003. In respect of flood risk management, the Act (subsections (3)
and (4)) requires "Scottish Ministers, SEPA and the responsible
authorities to work in an integrated fashion and co-operate with
each other to promote sustainable flood management". Subsequently,
the insurance industry has been frequently consulted through
W. Howarth (2004). "Economic
regulation and sewerage improvement". Journal of Water
Law, v15(6), pp 227-8.
North East Scotland Flood Appraisal
Group (2002). Drainage Impact Assessment: Guidance for
Developers and Regulators. Aberdeenshire Council.
(2010). Space for People.
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(2006). Financial costs of property damages due to
flooding; the Halifax Dundee flood loss tables 2005.
University of Dundee, sponsored by Halifax General Insurance
(2004). Scottish Planning Policy 7 (SPP7): Planning and
D. Crichton (2011b). "Regulating
reservoir risks‟. Town & country planning, v80,
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(2007). Scottish flood defence asset database. JBA
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(1997). Flood prevention schemes: guidance for local
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and Rural Affairs (2010). Future funding for flood And
coastal erosion risk management in England. Draft Technical
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Scotland's coasts and seas.
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(OJ L197/30), 21 July 2001.