Surminski oxford talk april 2016
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flood insurance - fit for the future
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Surminski oxford talk april 2016
- 1. Flood insurance – fit for the future? Dr. Swenja Surminski, 05/04/2016
- 2. Overview • Flood insurance in the UK • The role of Flood Re • Is flood insurance “fit for the future”?
- 3. The story • We have a problem: flood losses are rising (for a variety of reasons). • We have different views on who should pay for flood damage: solidarity versus risk-based concept. • There are growing concerns about affordability and availability of flood insurance. • We can’t avoid flooding, but need to manage it. It is often unclear who can actually deliver flood risk management. • In order to be fit for the future: any insurance scheme that wants to remain viable needs to deliver two results – risk transfer and risk management. • What is the role of insurance?
- 4. Insured flood risk losses Bank of England/ PRA, 2015
- 5. The UK situation • Underwriting is provided by the private sector, while government maintains a role in terms of flood risk information and flood management through partnership approach • Enshrined in the Statement of Principles between government and industry • High rate of market penetration (91% buildings/75% contents), but not compulsory • Move to new system ‘Flood Re’ in April 2016
- 7. Who pays for whom? Quelle: Defra, 2013
- 8. Flood Re starts in April 2016
- 9. “Fit for the Future?” • What will be the impact of Flood Re? • How will the insurance market respond? • Are we going to continue building in flood risk areas? • Will we have a better understanding of all types of flood risk? • Will flood risk management efforts be sufficient? • Will we see more resilience?
- 10. Climate change impacts • Flood losses across the EU are expected to increase from €4.2bn per year (2000-2012) to €23.5bn by 2050. • Insured losses are expected to increase from €1.6bn per year (2000-2012) to €4.6bn by 2050. Present and projected flood losses for return periods across the EU form Jongman et al. (2014)
- 11. Pricing and Climate Change Based on Jenkins et.al. (2016), cited in Prudential Regulation Authority and Bank of England. The impact of climate change on the UK insurance sector (2015)
- 12. How to design flood insurance fit for the future? Source: Defra (2011) ‘Principles for flood insurance’
- 13. Encouraging flood risk management? Surminski and Eldridge, 2014
- 14. Flood Re: what levers for flood risk management? Resilient Repair? Risk Information? Incentivising flood protection, planning policy ? Incentives for resilience measures?
- 15. The risk reduction and resilience angle Insurance is widely considered as an economic incentive for prevention and risk reduction. The practical evidence for this is limited, barriers are well-known. → What is needed to proceed? Some examples: • Advice and information for clients (flood alert) • The WIND-advice service from Provinzial in Germany • Resilient repairs → Does it work???
- 16. Some recommendations • More transparency and data sharing – why is Flood Re ‘hidden’ from those who are covered? • A clear transition plan for Flood Re, including FRM investment levels and how risk reflective pricing will be achieved particularly with the expected impacts of climate change. • More incentives and information needed for policyholders to minimise their risk through property resilience measures e.g. improved terms, reduced premiums, community strategy. • A clear message to national and local government that flood risk needs to be addressed. • Use of resilient reinstatement when paying claims. • Bring mortgage providers and developers to the table.
- 17. Thank you for your attention. For further information: s.surminski@lse.ac.uk
Editor's Notes
- So this is what would like to discuss with you over the course of this session. I would want to keep this interactive – so I might pause and ask questions, also to make sure that youstay awake…
- Ask questions – at the end: hanks for participating. Why those different questions? Well – it highlights the key points of what would like to discuss with you today: -flood insurance is addressed differrntly aross the EU; perceptions play an imoprtant role; it involves insurance as a product/service; and it raises the question of roles and respnsbilities – particularly in times of rising risks.
- . A large degree of flood risk management is subject to devolved legislation,
- 100% private market solution; Government commits to risk management (partnership approach) – but effective???; High penetration levels (above 75%) , but not mandatory; Part of the standard home-insurance package; But: Customers concerned about un-affordability; Insurers concerned about commercial viability; Government concerned about public liabilities; Swenja concerned about future flood risk levels!
- How would you define ‘future-fit flood insurance’? Timeframe; design; structure; participants; worldview; risk trends Yesterday, listening to the NFIP presentaiton of Steve = in financial terms we seem to be far better off. Regulator: solvency, insurers not getting bust
- 100% private market solution; Government commits to risk management (partnership approach) – but effective???; High penetration levels (above 75%) , but not mandatory; Part of the standard home-insurance package; But: Customers concerned about un-affordability; Insurers concerned about commercial viability; Government concerned about public liabilities; Swenja concerned about future flood risk levels!