Evaluation of multi-sectoral partnerships (MSPs): flood risk management and climate change in London
Evaluation of multi-sectoral partnerships (MSPs): flood risk management and climate change in London
Adaptation by societies and economies alone is not considered to be sufficient to address the complexity, range and magnitude of risks and opportunities associated with climate change (EEA, 2014).
Video
Can flood insurance schemes help prevent flooding and address the underlying risk of flooding? Watch the interview with Swenja Surminski, Senior Research Fellow, London School of Economics.
Flooding is the costliest natural disaster worldwide, and the effective management of long-term flood risk is an increasingly critical issue for many governments across the world, especially in light of climate change. In England flooding is recognised as one of the most common and costliest natural disasters and is listed as a major risk on the National Risk Register. The consequences of surface water flooding were brought to the forefront by the summer floods of 2007, which caused the country’s largest peacetime emergency since World War II. The total economic cost of the floods was estimated to be £3.2 billion (2007 prices), with £2.5 billion borne by households at a cost of £1.8 billion to insurers.
The combination of biophysical and human factors influencing surface water flood risk means that it is extremely challenging to predict the occurrence and extent of events, limiting the ability to warn and plan for future risks. This and the large number of stakeholders involved make managing surface water flooding a very complex issue that requires multi-sectoral collaboration. One area where this is particularly apparent is flood insurance.
A unique aspect of cross-sectoral involvement in flood management in the UK is the public-private partnership on flood insurance between the government and insurance industry known as the Statement of Principles (SoP). Flood insurance in England (and across the United Kingdom) is unique amongst most other national schemes as it is purely underwritten by the private market, while the government commits to flood risk management activities.
In 2008, the SoP was extended for a final five-year period until 2013 and committed the government and insurance industry to a transition to a free market for flood insurance. However, sparked by concern about rising risk costs, the frequency of high loss events and the belief by the insurance industry that a free market might leave around 200,000 high risk homes struggling to afford cover a modified version of the partnership was agreed in 2013 with the creation of Flood Re, which started operations in 2016. Designed to secure affordable cover for properties at high risk of flooding, Flood Re complements the current insurance market, where private insurers are offering cover against flood damage as part of standard home insurance policies. Households under low to normal flood risk will still be provided with insurance as standard, whilst the flood element of the home insurance policy for the 1-2% of highest risk properties can be passed to Flood Re by insurers (Figure 16.1). The proposed Flood Re scheme is designed by Government and industry as a transitional solution, with an anticipated run time of 20-25 years. It aims to help smooth the transition to more risk-based pricing in a competitive insurance market in the future, while securing future affordability and availability of flood insurance.