PROTECTION FROM IMPACTS OF SEVERE WEATHER

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PROTECTION FROM IMPACTS OF SEVERE WEATHER

• An insurance perspective

Rupert Wailes-Fairbairn ACII
Thursday 12th February 2009


Lycett, Browne-Swinburne Douglass Ltd is
authorised and regulated by the Financial
Services Authority.
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Climate change

• If we dont act, the overall costs and risks of
  climate change will be the equivalent of losing
  at least 5 of global GDP each year. If a wider
  range of risks and impacts is taken into account,
  the estimates of damage rise to 20
• Governments Stern Review on the Economics of
  Climate Change

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Is it real?

• 2007 Floods
• 165,000 claims
• 120,000 household claims
• 27,000 commercial claims
• 18,000 motor claims
• Cost to insurers 3 billion
• Equivalent of 4 years normal claims experience
• Largest natural catastrophe insurance loss ever
  recorded in the UK

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Effects of climate change

• Flood
• Storm
• Subsidence

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Flood

• 5,000 infrastructure sites in England and Wales
  where flood risk is greater than 1 / 75 years
• 2,215 power stations and sub stations
• 737 sewage and water treatment works
• 680 health centres and surgeries
• 401 schools

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Flood - definitions

• Rainwater collects and cannot drain flash
  floods
• Heavy rainfalls filling rivers and waterways
  above normal levels
• Localised flooding due to saturation of the
  ground
• Areas below sea level rising groundwaters can
  build up
• Blocked sewers, underground drains feedback
  water

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Flood prevention relevant organisations

• Environment Agency
• Local Authorities
• Highways Agency Local Authorities
• Private water companies
• Responsibility for surface water flooding is
  currently very, very unclear
• Barbara Young, Chief Executive, Environment
  Agency

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Flood - planning

• 13 major developments went ahead in 2006 /7
• The Environment Agency opposition put lives at
  risk
• 7 of the projects were in areas of highest flood
  risk

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Flood - the role of Government

• Flood risk map
• Integrated response
• 25 year national strategic plan for flood defence
  and management.
• For every 1 further we can spend, we would be
  able to save the country 6 in repair costs

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Flood - progress so far

• Policy Planning Statement 25
• Flood Protection Association
• Additional expenditure for flood defences for
  2008 2011
• 800 million
• Common Agricultural Policy
• Revised Statement of Principles on the Provision
  of Flood Insurance

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Flood - Revised Statement Of Principles On The
Provision Of Flood Insurance

• Until 30 June 2013, Association of British
  Insurers (ABI) members commit to
• Continue to make flood insurance for domestic
  properties and small businesses available as a
  feature of standard household and small business
  policies if the flood risk is not significant.
• Continue to offer flood cover to existing
  domestic property and small business customers at
  significant flood risk providing the Environment
  Agency has announced plans and notified the ABI
  of its intention to reduce the risk of those
  customers below significant within five years.

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Revised Statement Of Principles On The Provision
Of Flood Insurance

• The premiums charged and policy terms will
  reflect the level of risk presented and are not
  affected by this commitment.
• The commitment does not apply to any property
  built after 1 January 2009. The ABI encourages
  developers and customers purchasing a property in
  a new development to ensure that it is insurable
  for flooding.
• The commitment is subject to annual review
• After July 2013 the industry will continue to
  work with existing customers to explore insurance
  options where flood risk is significant and no
  public plans are in place to defend the property.

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Flood - practical steps

• Drainage
• Clear ditches
• Flood barriers / shields
• Non returnable water valves
• Flood resistant air bricks
• Insurance!

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Flood - insurance considerations

• Check out Environment Agency Flood Maps
• dark blue 1100, light blue 11,000
• http//maps.environment-agency.gov.uk/wiybyContro
  ller?epmaptopicslang_e
• Once cover is in place it cannot be withdrawn
• Surface run off
• Crops in field risk of trade
• Crops in store cover has to follow MD

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Storm Beaufort Scale
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Storm practical steps

• Be pragmatic
• New / old buildings
• Sheltered / exposed
• Solid / timber
• Redundant / planning
• Snow
• Crops in field hail only
• Crops in store cover has to follow MD

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Subsidence

• Drier summers
• More droughts
• Amplification of seasonal wetting and drying
  cycle
• Increased risk of subsidence

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Business Interruption Insurance

• Many businesses, particularly small and medium
  sized enterprises do not have adequate flooding
  or business interruption insurance in place prior
  to the weather event.
• SMEs account for over 50 of national income and
  employment.
• 69 have no contingency plan to cope with serious
  events that might affect their business and 41
  have no business continuity or loss of earning
  insurance.

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The future of insurance premiums

• Volatility
• Reinsurance
• Cost
• Dont shoot the messenger!

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Evaluating the value of insurance

• Understanding of utility
• Must be covered by insurance
• Would be nice to be covered by insurance
• Can be self insured

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Useful Organisations

• Flood Protection Association http//www.floodprote
  ctionassociation.org 0870 2422340
• Property-level flood protection
• Association of Building Engineers
  http//www.abe.org.uk 0845 126 1058
• Building flood surveys
• Chartered Institution of Flood risk assessments
  http//www.ciwem.org.uk 020 7831 3110
• Flood risk assessments
• British Hydrological Flood risk assessments
  http//www.hydrology.org.uk 020 7222 7722
• Flood risk assessments
• Institution of Civil Community-level flood
  http//www.ice.org.uk 020 7222 7722
• Engineers protection schemes
• Lycetts rupert.wailes-fairbairn_at_lycetts.co.uk