Thursday 12 December 2013

If you have an expensive house near the sea, it’s time to sell

The latest edition of the Economist doesn't mince its words:

Flood insurance

Sea change

If you have an expensive house near the sea, it’s time to sell
Dec 14th 2013 | 

For sale: lovely house, sea views, minor damp problem

ON DECEMBER 6th the largest storm surge since 1953 hit Britain’s coasts, flooding 1,400 houses. The fact that only two people died—compared with 326 in the earlier storm—is testament to the tidal barriers built in Britain over the past few decades.

Yet the system that created many of those sea defences, and encouraged people to keep living in flood-prone areas, is being abandoned.

Since the 1960s the government has paid to build flood defences while insisting that insurers cover most properties in flood-prone areas. This arrangement has gradually become a casualty of austerity and climate change. Spending on flood defences fell from £629m ($972m) to £510m between 2010 and 2012. Simply repairing existing defences would cost £1 billion per year by 2035. New flood defences will be subject to a rigorous cost-benefit analysis, with more land in effect surrendered to the sea. The last agreement with the insurance industry came to an end this July.

In place of the old system, the government has proposed shifting the costs of flooding onto homeowners. All households taking out insurance will now pay a £10.50 levy to Flood Re, a not-for-profit fund, to subsidise premiums for 500,000 houses in flood-prone areas.

The new scheme is patchy. Whereas the old agreement covered all properties with no worse than a 1-in-75 annual risk of flooding, the new scheme will exclude many. Houses in the top council-tax band and businesses will not be allowed to join the scheme. Houses built since 2009 will also not be covered (28,000 were planned to be built on floodplains in 2011 alone). If properties flood too often they will be thrown out of the scheme. MPs in flood-prone places such as Hull are not happy.

Worse, Flood Re’s sums do not yet add up. One government study suggested that the fund has a 58% chance of running out of money in the initial 20 years the scheme is to run for. Some fear that the state may find itself spending some of the money saved by building fewer defences on topping the scheme up.

The housing market seems already to be pricing in higher risk. Between 2008 and 2012 property prices rose in four out of the five Lincolnshire postcodes with the lowest flood risk. They fell in four out of the five areas of highest risk (see chart). This may have some good effects. Forcing homeowners to shoulder more of the costs of flooding should encourage them to invest in precautions and discourage builders from erecting houses in risky areas. But in the meantime, in low-lying parts of Britain, wellington boots and sandbags may make wiser investments than houses.

Flood insurance: Sea change | The Economist

From today's Guardian:

Three million properties shown to be at risk of flash flooding in England

New maps from Environment Agency reveal level of risk to properties – including No 10 Downing Street
UK Flood Warnings In Northern United Kingdom As Heavy Rain Storms Hit
Floodwater covers the streets of St Asaph in north Wales after torrential rain in November 2012. Photograph: Christopher Furlong/Getty Images
Three million properties in England, including No 10 Downing Street, are at risk of flash flooding, according to new maps published by the Environment Agency on Thursday. The maps, the first of their kind to be made available to the public, were described by the agency as a "vital service", enabling homeowners to check their level of risk.
But ministers have been criticised because an affordable homeinsurance scheme being developed does not take account of the risk of flash flooding, or the warning from the government's own advisers that climate change will increase flooding.
Intense downpours are becoming more common according to the Met Office, and when water overwhelms the drains, it leads to flash flooding, also called surface water flooding. In total, 5m properties in England are at risk of flooding, when those threatened by river and coastal floods are also counted.
"We have used cutting edge technology to map areas at risk of surface water flooding in England," said Paul Leinster, chief executive of the Environment Agency. "These maps are now amongst the most comprehensive in the world. With one in six homes in England at risk of flooding we urge people to check if they are at risk. Accessing accurate, up-to-date information on surface water flood risk will help homeowners and businesses take steps to reduce the often devastating, and expensive impact of flooding," said Aidan Kerr, at the Association of British Insurers (ABI).
UK Flood : Severe Winds As Storm Surges Threaten Coastal RegionsA resident sits on the stairs of an flooded building in Boston, England. Photograph: Peter Macdiarmid/Getty Images
The government is currently bringing forward a new insurance scheme with the ABI where a premium on all policies ensures people in high risk areas can obtain affordable insurance. But Guy Shrubsole, at Friends of the Earth, said: "In the light of all the scientific evidence, it is astonishing that the environment secretary Owen Paterson's new flood insurance scheme fails to factor in risks from both surface water flooding and future climate change."
Maria Eagle, Labour's shadow environment secretary, said: "Paterson is in denial about the scale of the threat from climate change, and the increase in flooding that will be the result of a failure to act. This is evident in the decision not to consider the increase in homes that will be at risk from flooding in the proposed Flood Reinsurance scheme, despite warnings from the Committee on Climate Change."
Environment minister Dan Rogerson said: "We understand the damage and the stress that flooding can cause. That's why we're spending an unprecedented amount of money on protecting communities from flooding and coastal erosion." Annual flood defence spending will rise between 2015 and 2020 but fell sharply when the coalition government took power, leaving hundreds of defence schemes unbuilt.
A spokesman for the Department of Environment, Food and Rural Affairs (Defra) added: "Flood Re is designed to be flexible so it can adapt to climate change."
Increased flooding is the greatest threat posed by climate change in England, according to the government's own research. Defra is responsible for the national programme on adapting to climate change, but in May the officials working on the issue fell from 38 to six.
Commenting on the new flood insurance scheme not including surface water flooding and climate change risks, Bob Ward, policy director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, said: "Defra is unable or unwilling to perform the analysis needed to ensure that its plans are robust, and is a further example that it has been failing, since the appointment of Paterson as environment secretary, to ensure that the UK adapts to the impacts of climate change, particularly flooding." Ward said: "The alarming truth is that Defra's continuing preference for basing policies upon Paterson's ideological views on climate change, rather than on expert scientific advice, is placing the lives and livelihoods of millions of people in the UK at risk."
Three million properties shown to be at risk of flash flooding in England | Environment | theguardian.com
Flood insurance scheme ignores danger from future climate change | Environment | The Observer

From the Green&BlueTomrrow blog:

Government’s flood insurance plan ignores risks of climate change, warn Friends of the Earth

Almost half a million homes at significant risk of flooding will not be covered by the government’s new insurance scheme, as officials have not accounted for the future impacts of climate change. 

As some coastal regions try to return to normality after the strongest tidal surge for 60 years caused severe flooding and forced thousands to abandon their homes, it has emerged that the government’s insurance deal, Flood Re, may protect only half of all the homes at risk from future flooding.
The government’s own Climate Change Risk Assessment states that “floods and coastal erosion are already serious risks in the UK, and they are projected to increase as a result of climate change.”
When factoring in the effects of climate change, the Department for Environment, Food and Rural Affairs’ (Defra) report calculates that during the 2020s, between 475,000 and 825,000 homes in England and Wales will be at significant risk of flooding – though these figures do not consider population growth.
However, environmental charity Friends of the Earth has warned that Defra’s assessments for Flood Re fails to take these projections into account because of the uncertainty over the figures.
Instead, it is reported that the likely figure of properties eligible for the insurance scheme will be capped at 500,000. The campaigners say that is simply down to a lack of understanding of systemic risk.
“Following the devastating damage caused by the biggest storm surge across the east coast in the past 60 years, it’s unforgivable that the government’s future flood insurance plan excludes consideration of climate change,” says Guy Shrubsole, Friends of the Earth climate and energy campaigner.
“Its own figures show that global warming will put tens of thousands more British homes at risk of flooding in future.
“The environment secretary must stop playing Russian roulette with people’s homes and livelihoods through his cavalier approach to flood risk.”
A committee of MPs is currently debating the government’s Water Bill, which includes Flood Re. The deal is designed to ensure that flood insurance is affordable for homeowners at high flood risk, but many details are yet to be decided.
In January, research by the London School of Economics also suggested that around 800,000 homes in England and Wales could be affected by flooding in the next 10 years.
An Environment Agency report, published in November, found that flooding cost the UK £600m in 2012, with 70,000 properties affected.

Further reading:

Government’s flood insurance plan ignores risks of climate change, warn Friends of the Earth - Blue and Green Tomorrow

From Geoffrey Lean in the Telegraph:

Why a damp squib needs to have an explosive effect on ministers

The massive floods feared over the last few days proved to be an anti-climax, but one that needs to have an impact on Government priorities. For the storm surge that assaulted Britain's coasts was actually worse than one that overtopped defences over 1000 miles of coastline, killing 307 people, in 1953. 
The difference? Flood prevention measures have been put in place, saving an estimated 800,000 homes. 
But now, as I report in my column this weekend, cuts are causing the Government to fall behind in tackling the increasing threat of flooding posed by climate change.

Why a damp squib needs to have an explosive effect on ministers – Telegraph Blogs
After the deluge: time to look again at our flood defences - Telegraph

From the New Statesman:

The coalition is failing to insure Britain against the risks posed by climate change

Flood risk is rising a result of climate change yet the government assumes it will remain the same and has cut back spending.

There is a better way. A small committee of MPs is currently scrutinising the government's flood insurance plans. Amongst them are MPs representing constituencies affected by this week's floods, such as Andrew Percy, Conservative member for Brigg and Goole along the Humber. It is within these politicians' power to amend the government's flood plans for the better.
MPs should require the Environment Secretary to take account of climate change when setting out how many homes will benefit from the flood insurance scheme. After the flood waters recede and people return to repair their homes, it is the least politicians can do to offer British households some comfort that they will continue to be insured against these risks in future.
David Cameron might wish to reflect, too, on whether it is really so wise to have put Owen Paterson, a climate change sceptic, in charge of protecting the country against climate change risks. His mind might turn to his party's ongoing support for fracking and fossil fuel tax breaks, only adding to the problem of climate change. And he might like to mull his recent words spoken in the aftermath of Typhoon Haiyan, and consider how relevant they also are to Britain: "If I said to you there's a 60% chance your house might burn down... you take out some insurance. I think we should think about climate change like that."

The coalition is failing to insure Britain against the risks posed by climate change

Which takes us to a piece in the Independent a couple of weeks ago 

Owen Paterson, his sceptic brother-in-law, and how Defra went cold on climate change

Global warming has slid down the agenda since the arrival  of Owen Paterson as Environment Secretary. He even thinks it may be a good thing. James Cusick delves behind the scenes to find out where he’s getting his ideas from

Given David Cameron’s reported – although denied –desire to “get rid of all this green crap”, Paterson’s arrival at Defra last year is being seen as the beginning of a shift in Government priorities.
At the time, Tory MP and environmentalist Zac Goldsmith noted that the appointment was “odd”, and that if the Conservatives wished to retain their green credentials, then it would have been better to appoint someone who didn’t dismiss environmentalism as a left-wing issue.

A year on, Goldsmith’s view hasn’t changed. At his party’s conference in Manchester, he joked to a fringe meeting that Paterson had recently said there could be advantages to climate change.
Goldsmith said : “This is a huge step forward. As far as I know he previously didn’t think global warming was happening. “Matt Ridley has famously claimed there would be a “net global benefit to human or planetary welfare” from global warming up until temperatures increased 2.2C from 2009 levels...

The Independent asked both Mr Paterson’s special adviser and officials at Defra if he could provide a clear statement on his climate change views, and whether or not  he could be described as sceptic.  Mr Paterson’s adviser said : “We have no intention of providing The Independent with any information that could be distorted. What The Independent has previously written about what he has said is disgraceful.”

Owen Paterson, his sceptic brother-in-law, and how Defra went cold on climate change - UK Politics - UK - The Independent
Comments made by Owen Paterson on climate change - Publications - GOV.UK

With some further observations:
Could someone please tell Owen Paterson the difference between faulty journalism and good climate science? – Telegraph Blogs
Owen Paterson v the science of climate change | Environment | theguardian.com
Environment secretary Owen Paterson says UK will benefit from global warming - Blue and Green Tomorrow

The Sidmouth Independent News has highlighted concerns about flooding and insurance:
The consequences of flood damage and withdrawn insurance | Sidmouth Independent News
Flood insurance for small businesses | Sidmouth Independent News
High value properties and those constructed after 2009 may not be eligible for flood insurance after 2015 | Sidmouth Independent News

See also:
Futures Forum: Preview ""Vote blue to go green" revisited..."
Futures Forum: "...trying to use Typhoon Haiyan as an excuse to justify more concerted global action to 'combat climate change'... "

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