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Prevention is better than cure

By [email protected] - 7th January 2016 - 16:51

Early December saw insurance assessors and loss adjusters setting to work in the wake of Storm Desmond. A timely moment, then, for Ordnance Survey and flood risk mapping specialists Ambiental to host a well-attended breakfast meeting at the Lloyds building in central London.

It provided an opportunity for the hosts, supported by Michael Wade, Crown Representative for Insurance at the Cabinet Office, to outline the ramifications and challenges of Flood Re, a Treasury-backed initiative that, from April, will place a levy on the insurance industry and, in return, underwrite insurance for home owners in flood-prone areas who could otherwise be faced with unaffordable premiums and/or insufficient levels of cover.1

With some 2.3 million homes at risk of flooding in England and Wales, a fifth of them in the highest risk category, it’s no small challenge. As Aidan Kerr, Director of Operations for Floor Re noted in alluding to the house building surge announced in the Chancellor’s Autumn Statement. “It would be a real failure if Floor Re acted as an incentive for poor planning decisions. Properties built post-2009 don’t currently fall within the scope of Floor Re, so local authorities should take full account of flood risk, mindful that new-builds will require insurance in the open market.”

As always, balancing risk and reward is the fundamental challenge for the insurance industry. Cede too many properties to Flood Re and an insurer sacrifices premium income; cede too few and it assumes a higher and perhaps unacceptable level of risk.

Good news, then, that the spatial, temporal and address datasets now available, bolstered by recent research into flood cycles at the University of Durham, can be employed in a holistic manner to model flood risk down to property level. This will help insurers avoid over-classifying areas at risk and needlessly blighting entire neighbourhoods in the process.

With a proposed Government spend of £ £2.3bn on flood prevention measures over the next six years, geoinformation will play an equally important role in getting the best return on that investment too.