Another year, but is it the same old same old?
Flooding and terrorism have dominated many of the headlines over the last few years and as we go into 2016, they remain two of the biggest risks facing the UK.
And it is not just similar headlines, haven’t we heard most of the soundbites before? In recent weeks we have seen a succession of politicians promising more money for the parts of the country devastated by flooding (many not for the first time).
Victims are interviewed and once again bemoan the lack of investment in flood defences, difficulty in obtaining insurance and decisions of the Environment Agency (particularly if they feel that their property has been sacrificed to save the property of others in richer areas).
The Environment Agency still say they are doing the best they can with the resources available and sometimes have to make decisions to sacrifice property to save lives and both insurers and politicians talk about the new Flood Re Insurance Scheme (to be introduced in April 2016) as the panacea that will solve everything. But will it?
When you see torrents of water running through towns and villages, you wonder if any amount of money would have helped? However, this time there were bridges swept away, some of which have stood for hundreds of years. Yes, there was exceptional rainfall, but no doubt similar levels have been experienced before, so perhaps some of the criticism of river and flood management strategies are valid. The failure of multi-million £ flood defence schemes, decisions to clear and straightening rivers, hence not holding water in the upper stretches or the lack of trees to soak up flood water due to deforestation (something encouraged by EU subsidies to farmers).
The Flood Re scheme (funded by a £10.50 levy on all UK home policies) will help and ensure affordable flood cover for most residential properties, however it will not cover commercial property, blocks of flats, housing associations or property built after 1 January 2009.
The Government statement that they have seen little evidence that affordable flood cover will not be available for commercial property in flood areas is ridiculous. Suffering one serious flood is bad enough, but if it happens a second time most insurers will be reluctant to continue cover at anything like affordable terms. We had a commercial property near the Thames that flooded once and the insurers thought they were being generous by continuing to offer cover with a £40,000 excess!
A solution for business in flood areas is ongoing, but it is likely to be an industry solution without the compulsory levy. However, it will need to be profitable for participating insurers so those in the worse affected areas are likely to be uninsurable.
Some will blame global warming and climate change, but others will say there have always been changing weather patterns and the main issue is the lack of joined up Government. It is a good bet that the Environment Agency aren’t able to control everything they need and have little influence with wider contributory issues (such as housing and population growth) controlled by other Government decisions and EU directives.
So the upshot is that building continues on flood plains, even though they won’t be covered by Flood Re and we are likely to hear the same old soundbites when the next (and the next) bout of flooding occurs.
And it is also the same with terrorism, after each atrocity we have the usual outrage statement and that the terrorists won’t win (although in fairness what else can they say).
What they won’t say is that they do not seem to have a clue what to do about Syria (including which side to bomb), no answer to the migration crisis or real acceptance that we are facing the biggest upheaval of the European area since WW2 with an enormous clash of cultures. There are some very clever terrorists fuelling and taking advantage of the crisis, which inevitably makes it easier for terrorists to move around Europe.
If there is any ‘good news’ the Pool Re Terrorism Scheme (unlike Flood Re) is bound to accept all UK property risks. It is also inexpensive outside London and with no minimum premiums, cover can be added for very modest premiums for small business.
Terrorism insurance is not totally straightforward and is not just about bombs. An interesting Terrorism factsheet can be found on our website with more information.
Happy New Year!