View this article online: https://www.insurancejournal.com/news/international/2015/02/05/356608.htm
In a letter to Brendan McCafferty, the Chief Executive of the UK’s recently established flood insurance program, Subcommittee Chairman, Prof. Lord Krebs, wrote that the UK’s Committee on Climate Change (CCC) has concluded that “Flood Re’s costs are higher than necessary at the expense of household insurance bills.”
The letter points out that “even in the best case scenario there will be more homes at high flood risk in the coming decades that there are at present.” Lord Krebs referenced his previous letter to the UK’s Environment Secretary in which he outlined five relevant suggestions to be considered in the formation of Flood Re, as follows:
1) Build awareness of flood risk – This is stated only as a goal, but even though insurers will receive flood risk information from the government, “there is no guarantee that insurers will pass this on. As a result a number of insured’s might be unaware that they live on a flood plain, and the requirement to inform them of the risks should be made mandatory.
2) Encourage and support additional flood mitigation – There are as yet no “firm proposals” to make sure that policy holders are informed of what they can do to lessen the risks of flooding.
3) Place flood risk reduction ate the heart of Flood Re’s transition plan – There are no firm plans to help “high risk homes become more resilient.”
4) Target the benefits more keenly – The plan, as established, covers far too many homes, many of which aren’t exposed to extreme flood risks. “This makes Flood Re needlessly expensive and renders the costs of Flood Re three times the economic benefits.”
5) Require insurers to retain some risk – “A small element of risk retention by insurers would help preserve incentives for claims costs to be managed.
The letter expanded on those points and noted that the CCC is due to report to the UK Parliament in June. It suggests that changes in how Flood Re will operate, along the lines indicated, need to be made before then.
Source: Committee on Climate Change