Insurance and Flood Re: A Wales perspective

Flood insurance is a key flood risk management strategy, contributing to the greater resilience of individuals and communities. Insurers’ responsibilities include organising recovery, making funds available to quickly repair and rebuild properties, to replace possessions, and for businesses, to compensate for lost revenue (O’Hare et al., 2016). Insurance spreads risk over a greater number of premium payers, in order to guarantee support and provide compensation to individuals that otherwise would typically exceed their resources and hence lessens the financial impact of a flood event (Tesselaar et al., 2020). Insurance should thus improve recovery outcomes and enhance the financial resilience of households and businesses to changing flood risk.

1.1 National Strategy Requirements for Insurance

1.1.1 The Welsh Government National Flood and Coastal Erosion Risk Management (FCERM) Strategy (2020) states under objective B in “preparedness and building resilience” that it “remains the responsibility of a home or business owner to have adequate insurance cover against flooding” (WG, 2020, p30). The Strategy also states that the affordability of home insurance has been significantly improved in Wales through the take up of Flood Re, introduced in 2016 under the Water Act (2014). Flood Re being an initiative between the Government (UK) and the insurance industry that, since 2016, has aimed to enable householders in areas of high risk of flooding to get adequate cover at a ‘reasonable’ price (Browning, 2023).

1.1.2 The FCERM strategy also highlights that Property Flood Resilience measures “can help to prevent flood water ingress into a building or aid rapid recovery following a flood event. This can reduce repair costs and the misery and disruption caused by flooding” (WG, 2020, p31). Implementing these resilience measures “are best handled by an individual household or business” although RMAs “may also consider such interventions where NFM or traditional defences are difficult to implement or justify” (p31). From 2021, insurance claim payments have been permitted to include an element of “resistant and resilient repair, above and beyond the loss”, as part of Flood Re’s ‘Build Back Better’ strategy, designed to help reduce future flood risk (Browning, 2023). Householders can thereby access funds (up to the value of £10,000) to install property level protection measures as part of repairs after a flood (CCC, 2023).

1.2 WFCEC Sub-Committees Confirming Need for More Dialogue with the Insurance Sector

1.2.1 The Resources Sub-Committee “Resources for Flood & Coastal Erosion Risk Management in Wales” Final Report (2022) documented the issue raised by stakeholders that mechanisms for the uptake of resistance and resilience measures remain undeveloped, including the role of the insurance sector to ‘build back better’ (Issue 35). Proposal 18 of the report recommended that dialogue was progressed with the insurance sector to develop its role in the uptake of property level resistance and resilience/build back better. The Policy and Legislation Sub-committee (PLSC) in ‘The Case for Change in Legislation and Associated Policy on Flood & Coastal Erosion Risk Management in Wales’ (2022) under proposal 10 also recommended engagement with Flood Re and the wider insurance industry on standards for building back better after flooding events, with a timescale for improvement, and to consider a review of legislative options if needed.

1.2.2 Julie James, MS former Minister for Climate Change, in her response to the reports noted that there is already much work ongoing in improving property-level resistance and resilience measures and welcomed the recent changes in Flood RE following extensive work with the sector. The ‘Build Back Better’ scheme is designed to reduce the cost and impact of future floods by including property resilience measures as part of flood repairs. However, it was also noted that the results of the recent WG review of property flood resilience have yet to be made public, and it was to be hoped that publication could be brought forward, in order that any research needs and ongoing dialogue with the insurance sector can be reconsidered in relation to these proposals.

1.3 Aim and Content of this Report

1.3.1 In Wales, we currently lack data on insurance coverage, and on the number of and effectiveness of property flood resilience (PFR) installations. Section 2 evidences the lack of data for us to claim a significant improvement in Wales, and to confidently monitor progress to improve the uptake of property level flood resilience. Section 2 also draws on academic papers and reports in England and the UK. Scholarly research, research by the BMG group, commissioned by the Department for Environment, Food and Rural Affairs (Defra) and the Blanc Report (2020), an independent review of flood insurance undertaken at a local level in Doncaster, all document issues and challenges. (The latter was commissioned following the concerns of a number of MPs about limited awareness and take-up of insurance, as well as the exclusion of flood cover and allegations of “unscrupulous” practice by insurers (Browning, 2023, p21)). This body of research also suggests that we have an over reliance on the Flood Re Scheme. Hence this report also expands concerns to those households and businesses excluded from the scheme. If there are issues accessing insurance with Flood Re, it follows that there are implications for the uptake of property flood resilience. Section 3 looks at the need for wider responsibilities in transitioning from Flood Re to an affordable and effective ‘free’ insurance market, before section 4 draws out implications, emphasising and further building on our initial recommendations (from the initial Wales FCEC sub-committee reports).

2.1 A Lack of Monitoring of Insurance Coverage and Mechanisms for Property Level Resilience in Wales

2.1.1 The FCERM National Strategy measure against Objective B for ‘preparedness and building resilience’ concerns NRW providing advice on building resilience. (Measure 12: NRW to complete their online flood information improvements, working with WLGA and Local Authorities, by 2021. This will include publication of the Wales Flood Map products, understanding flood warnings and advice on building resilience and responding to flooding.) This measure therefore does not facilitate any direct monitoring of progress on insurance coverage or property level flood resilience.

2.1.2 The national climate change adaptation plan (2019) “Prosperity for All: A Climate Conscious Wales” does have an outcome “Buildings are prepared for flooding” (outcome 2). Although in their progress report, the Climate Change Committee report they have been unable to fully evaluate delivery on the outcome, beyond Flood Re’s own data on ‘access to quotes’ to buildings that are prepared for flooding. (Flood Re UK states that more households at risk of flooding are claimed to be able to access multiple insurance quotes due to the introduction of Flood Re, from 1% in early 2016 and now at 93% (Flood Re n.d. in CCC, 2023).)

2.1.3 The CCC (2023) report the lack of data in Wales (beyond access to quotations) concerning the level of insurance coverage and price of premiums, the fraction of successful insurance claims and the time taken for pay-outs. Data concerning the number of successful insurance claims for property level flood resilience installations is not available and furthermore there is a lack evidence on the effectiveness and maintenance status of any installed measures (CCC, 2023, p222). From an equity perspective, there is a lack of data on the proportion of households reporting financial barriers to both insurance and property level protection/adaptation (CCC, 2023). The CCC (2023) do cite emerging evidence of increased insurance costs in the wider UK, noting that Wales is part of a UK single market for financial services (CCC, 2023, p305).

2.1.4 Beyond Flood Re the CCC (2023) notes that “there are no clear policy mechanisms designed to accelerate the uptake of property flood resilience measures in Wales or regulate building design” (p15). There has been some progress to establish grants and loans targeted to business adaptation, they are not currently at the scale needed and again, we lack data on any adaptation actions taken in response. There are also, what the report terms “isolated examples of small-scale investment and delivery of PFR by local authorities”, including Anglesey (£28,000) and Neath Port Talbot (£74,000 on flood doors) between 2016-2019. In a survey of 180 properties in Dinas Powys after the December 2020 floods, it was reported that they were in receipt of £1.5 million funding (“from the Government”) to supply and install PFR measures. Welsh Government have “reactively provided business grants to recover from flooding”, noting the time-bound 2021 Flood Relief Fund for Welsh SMEs to recover from storm damage (up to £2,500 to cover costs that cannot be recovered from insurance). However, the CCC state that there has been no commitment to further and consistent flood recovery funding schemes for businesses (p295).

2.2 Flood Re on ‘Build Back Better’

2.2.1 Given ‘Build back better’ has only been in place since 2021, there is a particular dearth of reports and academic research to date. Flood Re have undertaken a property flood resilience market study (2023), reporting that the Property Flood Resilience (PFR) Sector is relatively new and also a relatively small segment of the wider building sector. For the past twenty years, it has been fuelled by flood events and subsequent grant programmes, so PFR has only been installed in response to events and resulted in an “up and down” industry, subject to ‘cowboys’ with the lack of quality assurance mechanisms. More recent codes of practice and product certification have led to greater delivery of measures, Flood Re states “more than 500 homes per year” have PFR installed. Flood Re does however claim that there are ongoing barriers to growth, including minimal plans for the scaling up of the industry without guaranteed demand, the intensive nature of the product certification process (too high an investment for many small businesses). The report specifically notes the efforts by Natural Resources Wales and the Welsh Government to leverage the EA’s PFR framework. However, the remoteness and small size of the Welsh market is said to form a barrier. (To note Scotland’s schemes are led by local authorities, directly authorising and funding, with the Scottish Flood Forum working with communities to disseminate PFR information.)

2.3 Known Issues Re Flood Re

2.3.1 Whilst Flood Re is a positive step forward, the scheme commenced with known limitations. If the scheme is accessed, it is not able to guarantee affordable insurance to existing policy holders or even guarantee cover to new customers. It does not provide a guarantee on any limitation on the cost of premiums or excesses offered (Browning, 2023). Insurers decide if a policy should be covered under Flood Re (Browning, 2023). In the same time period, insurers have been able to access more reliable data about flood risk and use this to exclude many customers, “resulting in a distortion in the home insurance market” (Browning, p11).

There are a series of caveats laid out for consumers on “Build Back Better” on the Flood Re website under FAQs. 

For example:

Q: Does it apply to all policies?
A: No – each insurer has a different initiative.

Q: Will I receive the full £10K?
A: Not necessarily – each Insurer sets their own limit.

Q: My Insurer offers BBB but I wasn’t eligible on my recent claim – why?
A: Each Insurer chooses different criteria which need to be met before BBB applies. This might mean that a certain claim threshold needs to be met, BBB might only be offered on a second flood or BBB only applies after a policy renews.

2.3.2 The Blanc (2020) report could not find conclusive evidence to confirm that Flood Re supported cover was being offered by insurance companies or taken up by households, or that residents were not taking up insurance on the basis of cost (despite Flood Re subsidies). The research could conclude that in Doncaster: 72% of property owners surveyed confirmed that they have either buildings (71%) or contents (68%) insurance that covered flood damage. 21% of property owner-occupiers in Doncaster did not know if their insurance covered them for flooding. 6% could confirm that they had flood exclusions applied to their building insurance and 6.5% with exclusions to contents insurance (Blanc, 2020, p5).

2.3.3 Property owner cover contrasted with tenants, with only 45% of tenants surveyed confirming they had general contents insurance, 11% could confirm that this insurance did not cover flooding but only 25% of tenants knew if they had contents insurance that covered flood damage. Further problems at a national level with both rental and leaseholder properties have been evidenced, whereby the freeholder of the property organises the insurance and then charges without consultation or raising awareness on whether or not flood insurance is included. One interviewer explaining:

we’re lumbered with what they [the freeholder] choose – no thought is put into it” (BMG, 2022, p18).

2.3.4 Blanc (2020) raised concerns that: “such a low proportion of tenants who are at high risk of flooding are not confident that they have any insurance cover at all in the event that they do flood” (p9). For further granularity on those not insured, UK level research (including Wales) for Defra found that 35% of households with an income of up to £12,570pa (35%) do not have insurance, which compares with less than 10% of those with an income of greater than £40,000pa (BMG Research, 2022, p17).

2.3.5 Beyond being able to afford insurance on low incomes, the qualitative research findings from the Blanc report (2023) drew attention to a number of barriers concerning the difficulties consumers face understanding insurance terms and conditions, including a low understanding per se of the value of insurance or vice versa, the risks of being uninsured. There was also evidence of mistrust of insurers. The report also stated that people living with a high risk of flooding often needed to be much more persistent in their efforts to find affordable insurance, and drew out the implications of being uninsured as being much more profound for people living with high flood risk.

2.4 An over-reliance on Flood Re?

2.4.1 Flood Re is only available to households in properties built before 2009. Flood Re excludes certain leasehold and all commercial properties, as well as coastal flooding risk. Data available from 2015, from the British Property Federation, detailed 800,000 properties in Britain that were at risk of flooding, yet ineligible for the scheme, 70,000 being at high-risk (Palmer, 2015 in Christophers, 2019). (Homeowners in top-end riverside mansions were said to be Flood Re’s biggest beneficiary (Ralph, 2016 in Christophers, 2019)). The UK Government’s explanation to exclude post 2008 development from Flood Re, was to aim to discourage any further development in areas at high risk of flooding, the ABI quoted as “[w]e must have a zero-tolerance approach to inappropriate development in flood risk areas and bring forward stronger measures to prevent this from happening, not measures that further incentivise it” (Browning, 2023, p17).

2.4.2 The UK Government claimed that English national planning policy aligned with this principle (Browning, 2023). Yet a House of Commons Report (Browning 2023) clarifies that despite the link between Flood Re and planning, many homes have continued to be built on floodplains and are therefore excluded from the scheme. Joint Guardian and Greenpeace analysis found up to one in five new homes built between 2015-2018 in the areas most affected by flooding from storms Ciara and Dennis in 2020 were built in flood zones (Halliday and Barratt, 2020). A spokesperson for the Ministry of Housing, Communities and Local Government responded:

Local authorities have a responsibility to assess the number of homes their communities need, and our planning policy is clear that housing should be located in the areas at least risk of flooding. Where development in a risk area is absolutely necessary, sufficient measures should be taken to make sure homes are safe, resilient and protected from flooding.” Defra, then also stated that any such development “should have appropriate resilience measures in place, so the cost of cover should be lower” [author’s (KP) emphasis] (Browning, 2023). Yet we also lack centralised or national-scale data on the number of new developments built with flood resilience measures (CCC, 2023).

2.4.3 Flood Re does not cover buildings insurance for a block of more than three leasehold flats, as the Secretary of State for Environment, Food and Rural Affairs in 2016 (then Therese Coffey) explained, that different dwellings have different flood risk and it is difficult to establish a fair approach (in Browning, 2023, p20). Whereas the explanation from the insurance industry, is that this is classed “as commercial business whereas Flood Re is designed for the domestic market” (BMG Research, 2021, p8). As such properties are often run by private management companies, then they should be eligible for landlord insurance (Browning, 2023). Again, the ABI and BIBA have been cited by the UK Government as not having identified a significant problem for leaseholders accessing flood insurance (Browning, 2023). Contradicting this Government statement, BIBA have argued that the logic unreasonably excludes up to a million householders (Browning, 2023). Qualitative evidence from a Defra commissioned report (BMG Research, 2022) raised further concerns from a BIBA services manager, that BIBA are now receiving more inquiries about buildings built from 2009, and those in residential flats of more than three units, including those with basement flat conversions, who are struggling to get flood cover (p29). This particular BIBA representative promoted the need for a future review to understand what can be done to help those outside of flood re eligibility criteria, questioning:

Where does the evidence sit that makes this [Flood Re’s eligibility criteria] relevant today and for the future?” (BMG Research, 2022, p29).

2.4.4 Any evidence on business insurance need and coverage is largely unsubstantiated and contradictory. In principle it was considered that the scope of Flood Re should not cover businesses, because it would create a “new levy on businesses, and could result in businesses across the country, and indirectly customers, subsidising profit-making organisations located at flood risk. Often businesses placed near rivers/coast benefit from their position, for example, river side or coastal views” (BMG Research, p8). It is alleged by the Government that there is little evidence that businesses found it hard to find insurance (Browning, 2023), a Defra study (2017/18) concluded there was “little concern” for availability to businesses (Browning, 2023, p19). In contrast, research by Sakai (2020) and Sakai and Yao (2023) evidenced the uncertainty around the reality and extent of businesses access to insurance cover and the affordability challenges. For example, from a government interviewee, they quote:

In some high flood risk areas businesses claim that they cannot even get quotes for insurance cover, but the insurance industry denies this, so there’s a question of who’s telling the truth here” (Sakai, 2020, p32).

2.4.5 Sakai’s (2020) interviews with SMEs revealed a localised rather than a systemic problem in accessing insurance. Hence although the reported numbers in Defra reports are small, they are not insignificant numbers in certain flood risk areas across the country (Sakai, 2020, p330). When insurance was available to SMEs, the costs of insurance versus their turnover was found to be high. For example, for the smallest businesses (with 0-4 employees), The average cost of insurance was £6000, representing over 1.5 times average monthly turnover (against average losses of £24,000). The research found a lack of will to price resilience measures into insurance, with resultant negative feedback loops, i.e. SMEs not wanting to protect themselves if resilience measures were not subsequently taken into account by insurance companies. After a flood event, Sakai and Yao (2023) found that micro-SMEs in particular were in a “precarious situation, with a larger financial loss against their monthly income” (p16).

2.4.6 As with domestic properties, there was found to be a lack of awareness from tenants as to responsibility for insurance, a lack of clarity on liability between tenants and landlords, and tenants relying on the willingness of landlords to put in flood risk management measures. One tenant explaining:

Well the landlords do two things. One is that they don’t do anything, and they leave you to clean up… or they say: ‘If you don’t like it, then go, somebody else will take it because it’s a popular place to have a business’… And the other side of it is that they will just do the same again and they will just put cheap plasterboard in, put the electrics back in again and say: ‘There you go, hope you don’t have another flood’. So, they will spend the minimum” (Sakai, 2020, p42).

2.4.7 Sakai and Yao (2023) also concluded “a lack of recognition by the national government of the ripple effects that the economic costs faced by SMEs have on towns at high flood risk” (p33) and a genuine need to offer both better quality and affordable insurance products to SMEs in flood-risk areas. The British Insurance Brokers’ Association (BIBA) have also urged the Government (Defra) to do more to help ensure SME access affordable flood insurance.

2.4.8 Government commissioned reports do not pick up on properties at risk from sea level rise and coastal erosion. This is being debated in the industry, that whilst there is support for those in high flood risk areas (i.e. Flood Re), nothing is in place to financially support homeowners facing huge personal risk and also liability (e.g. TMGroup, 2021).

3.1 Key Elements for a Future Insurance Partnership

3.1.1 The House of Commons Committee echoes concerns that “Flood Re is not providing the protection that was envisaged”, in particular drawing attention to the lack of data on the number of high-risk households that Flood Re protects. The committee also notes that Flood Re was introduced to allow properties to become flood resilient, but doubting that the UK was going to be in a sufficiently strong position for the scheme to close. For context, Flood Re launched in 2016, following extensive negotiations and public consultations, as a government-industry partnership. The Scheme was to address affordability, universal coverage and risk reduction through a reinsurance service to the industry. A levy is paid by all insurers (costs passed on via increased premiums to all household insurance policies), and the scheme’s reinsurance rates are based on Council Tax Bands, “as a proxy to reflect the householder’s ability to pay rather than reflecting the risk faced by the property” (Flood Re, 2018 in Hampton & Curtis, 2022). The distinguishing feature of Flood Re is that Flood Re has the explicit aim (a statutory responsibility) to restore an effective insurance ‘free market’ over a temporary 25-year life span. This necessitates a managed transition to risk reflective premium prices by 2039 (Hampton & Curtis, 2022).

3.1.2 A transition to a risk reflective free market means flood risk needs to be reduced to ensure flood insurance is affordable (Flood Re, 2016 in Hampton & Curtis, 2022). Flood Re is undertaking consumer campaigns, piloting ‘Flood Performance Certificates’ (like energy performance certificates) and generally engaging with partners on climate risk (Flood Re, 2023). But Flood Re only has the power to support and promote insurance and PFR, most of the actions that should lead to the reduction in insurance costs are not under the direct influence or powers of Flood Re (Christophers, 2019). There is also a complex interplay between WG Strategy’s claim that it “remains the responsibility of a home or business owner to have adequate insurance cover against flooding” and the responsibilities of a broader alliance of stakeholders (including national and local government, property owners and property developers) to ensure that insurance is affordable. Property flood resilience, through ‘Build Back Better’ is only one element to address the reduction in flood risk. As Christophers (2019) states, it is not Flood Re that controls decisions over capital flood defence investment and revenue, building regulations, the location for new development, wider policy on climate change adaptation, householder behaviour (Christophers, 2019), to that we should add well-being and social equality.

3.1.3 Back in 2015, Barry Gardiner (Labour MP) immediately raised concerns in parliament that the government had not so much given responsibility to Flood Re, but had abdicated responsibility. His fear was for the risk of flooding becoming greater as a result of lower Government investment in flood defences, increased building on the flood plain and adverse climate change (HC 27 October 2015, c8 in Christophers, 2019). Also at the time of Flood Re’s launch, Roger Harrabin captured the complex blame game for flooding responsibility (in England):

Hundreds of thousands of householders in flood risk areas have failed to install basic protection against rising waters, insurers say. … The insurers have been criticised by the Environment Agency for failing to protect inundated properties. … Local councils are also part of the melee – they want more cash for flood funding from the government, and more control of how it is spent. They are critical of the Environment Agency” (Harrabin, 2016 in Christophers 2019).

3.1.4 Yet for homeowners, Christophers (2019) is surprised by the “equanimity towards the private sector, alongside ‘consistent venom’ towards its public counterpart” and cites Meek (2008) that:

There is more hostility towards the government, the council and the Environment Agency for not stopping housebuilders than there is towards housebuilders for building houses … When insurers raise their premiums, more blame is directed at the government for not spending enough on flood defences than at insurers for raising the premiums”.

3.1.5 The House of Commons Committee Report (2023-24) also raises concerns with “new housing continuing to be built in high flood risk areas without adequate mitigations, as over half of Local Planning Authorities in England said they rarely or never inspect a new development to check compliance with flood risk planning conditions”. The report also notes the EA’s reduced forecast for the number of properties to be protected, to “at least 40% fewer properties” (p5) than originally planned in 2020. Rural communities are missing out on flood protection, and 203,000 properties are at increased risk due to poor maintenance and deteriorating flood defences.

3.1.6 Section 2.4 details the rationale for limiting cover to households in properties built before 2009 in order to discourage any further development in areas at high risk of flooding. In fact, concerns over building on floodplains and adequate flood defence characterises the relationship between the UK government and the insurance industry. From 1961 to 2001, an informal ‘Gentleman’s Agreement’ existed between insurers and the Government to enable flood cover in the UK, enabled by cross-subsidies in premiums between low and high-risk households (Penning-Rowsell et al., 2014 in Hampton & Curtis, 2022). In exchange, the Government agreed to invest in flood defences, limit further floodplain development (Christophers, 2019) and not introduce formal regulations into the market (Hampton & Curtis, 2022). (The latter said to have staved off Tony Benn’s threat to nationalise insurance when Labour came into power (Crichton, 2005 in Christophers, 2019)). Due to large payouts and increasing losses from severe flood events at the turn of the century and continued development on floodplains (against Environment Agency advice), the insurance industry became “increasingly disaffected” with the government “not keeping its side of the bargain” (Crichton, 2005 in Christophers, 2019, p8). The ‘Gentleman’s Agreement’ was formalised in the ‘Statement of Principles’. This permitted more market competition, with premiums more reflective of risk and the agreement only covering 75% of homes and businesses on flood plains. For the remainder, cover was agreed where flood defences were planned by the Government by 2007 (Association of British Insurers, 2008; Crick et al., 2018 in Hampton & Curtis, 2022).

3.1.7 Aviva (the UK’s leading diversified insurer) has commissioned recent research that reports “one in thirteen (8%) new homes built in England in the last ten years are in a flood zone, the equivalent of almost 110,000 homes”. The research highlights that “this is despite homes built since 2009 being excluded from the Flood Re reinsurance scheme” and that in some locations, may have no defences in place. The research also found that one in eight (13%) of new build residents said their home had been affected by flooding inside, 16% having suffered a flood event in the garden. Aviva’s UK Ireland CEO is quoted: 

it is paramount that any future plans for new homes include strengthened rules to prevent the development of buildings in current and potential flood zones. But in some low-lying parts of the country, this is more difficult. In these cases, flood resilience should be made mandatory in planning rules and built in from the outset.

From 2039, Hampton and Curtis (2022) also maintain that senior decision-makers have not yet accepted that it will be more than a few householders that will require additional support:

Belief in the power of subtle market reforms and behavioural nudges appears to be blinkering Flood Re stakeholders to the likelihood that climate change and the irresponsible development of housing in high-risk areas will multiply costs and inequalities” (p88).

3.1.8 Crick et al. (2018) observe that the role of property developers in reducing flood risk has not received much attention, noting “the burden of flood risk does not remain with developers but rests with home-owners, who then use flood insurance to transfer this risk, either voluntarily or as required through their mortgage provider” (p194). Large mortgage lenders, Barclays and NatWest Banks, are clear that they require adequate home insurance in place for a property judged to be at a high risk of flooding (Jones, 2024). Mary Long-Dhonau (2024) has more recently raised concerns that homeowners are “being hit with mortgage rate hikes when renewing, due to the perceived flood risk of their home” and that there are reports the UK’s second largest mortgage provider, the Nationwide Building Society, are stopping lending on properties at a high risk of flooding. The lender is now using mapping technology and will decline a mortgage if the property is deemed to be at high risk, although this is said to only affect a very limited number of homes (Jones, 2024). Other lenders are considering their position if the Flood Re scheme ends as planned in 2039 (ibid).

Flood insurance is a key management strategy for flood risk, improving recovery and contributing to building social and economic resilience for individuals and communities (French and Kousky, 2023). An integrated course of action or ‘risk partnership’ is accepted good practice, “that flood risk must be carried on several shoulders: the public authorities, the people and enterprises affected, and the financial sector, in particular the insurance industry. Only when they all cooperate with each other in a finely tuned relationship, in the spirit of a risk partnership, is disaster risk reduction really effective” (Kron et al., 2019, p205). As O’Hare et al. (2016) reflected, there is no doubt of the important role that insurance has to play, but this is not only in facilitating recovery, it is also in “framing the hue of resilience that is adopted by society” (p1187).

4.1 Seeking Conclusive Data Re Flood Re and ‘Build Back Better’

4.1.1 The CCC (2023) report that for Wales, data on the proportion of households or businesses reporting access to and level of insurance coverage, or premiums, is not currently available. Thus to note for the future revision of the National Strategy, we appear to lack conclusive evidence to claim that the affordability of home insurance has been significantly improved in Wales through the take up of Flood Re.

4.1.2 In England, the Environment Agency have proposed an indicator "proportion (%) of properties in 'at risk' areas without home, business and contents flood insurance coverage", for which methods of data collection are under development but noting the insurance sector would need to agree to provide the data transparently (EA, 2022).

Question 1 - Do we need a measure/sub measure on proportion of properties at risk but without insurance in the National Strategy, and should/could this go further than the EA in taking on issues, e.g. affordability, refusals and other barriers to accessing insurance?

4.1.3 The CCC (2023) report also notes that there is limited data available to assess access to insurance and capital for adaptation, any understanding of the barriers to accessing adaptation finance more broadly being very limited (p310). CCC (2023) observe that data from insurance providers could enable better tracking of the preparedness and risk assessment of buildings. To note the work programme in the first of Flood Re’s five-yearly transition plans sets out the need to develop an understanding of “how its data might be shared to help other actors make decisions over the action needed to manage the risks and costs of flooding” and to provide “the evidence base needed to understand how households and insurers can be supported to manage the risks of flooding and reduce the costs of claims” (Flood Re, 2016 in Christophers 2019).

Question 2 - Do we need a measure on proportion of properties accessing ‘build back better’ insurance claim payments and installation of PFR resilience measures and to progress dialogue with the insurance sector for data?

4.2 Tackling Issues and Seeking a Deeper Understanding of Challenges

4.2.1 Any householders in Wales unable to gain insurance means they cannot progress to the recovery stage and resilience. As O’Hare et al. (2019) highlight, this presents critical questions regarding social justice and vulnerability. The National Infrastructure Commission for Wales (NICW) have recently completed the ‘Managing Flood Impacts in Wales 2050 project’. In the long-term vision for Wales, for “a hopeful future where we are adaptive and resilient to future flood risks”, the “current bias on the floodplain and coasts with regards to socioeconomic inequalities and flood disadvantage for marginalised communities” is recognised (ARUP, 2024, p44). “Public access to insurance” is recognised as a key driver to resilience (ARUP, 2024, p46). The research has noted the many reasons the public are at risk of not gaining insurance cover in the future, that include cost, difficulties in understanding insurance policies and lack of awareness of living in high-risk areas (ARUP, 2024) – but crucially, not including that some householders and SMEs are conceivably excluded from obtaining insurance for flood risk in Wales.

4.2.2 There has been a strong focus in the wider flood risk profession on providing relevant information to help increase flood awareness, engagement and preparedness, but arguably unidirectional? Opening a channel of communication for constructive interaction and dialogue not only furthers self-help but offers an opportunity for capturing local knowledge and experiences with insurance that is clearly lacking at a national level. This report draws on evidence from England, the Blanc Report (2020) highlighted some issues with exclusions and particular concerns with tenants and households with low incomes. What is the more detailed and complex nature of the issues being reported and from whom in Wales? Tenants? Businesses, particularly SMEs and micro-SMEs?

Question 3 - Is there a mechanism for opening up lines of communication and collating data, or should this be taken forward as a key research need (including through the WFCEC Research Sub Committee)?

4.2.3 The BMG Group Report (Defra commissioned) did not conclude with recommendations to the Government and Defra have not issued a response to the findings. The Blanc Report’s (2020) recommendation was that Local Authorities should ensure that tenants in high flood risk areas are given guidance on i) the range of risks they face in the event of a flood and ii) ways in which they can protect themselves with adequate insurance cover. Caveated with first understanding if insurance is available, as per the population surveyed in Doncaster, do we know if residents in Wales understand their flood risk and their insurance requirements, as well as how to access insurance that covers those needs (including subsidised Flood Re supported insurance where this is available)? Can they easily understand the insurance cover they (or in tenanted or leasehold properties, their landlord) has bought? Do they have confidence that their insurer will provide that cover in the event of a claim?

4.2.4 Whilst NRW provide guidance and links to comprehensive guidance on flood insurance (e.g. ‘check your insurance’ and ‘making a claim’, the recommendation (11) of the Blanc report goes further, in that there should be targeted flood risk communications from Flood Re, the ABI, as well as the agency (in this case the Environment Agency). Targeted engagement should promote awareness of flood risk to high exposure households and businesses, including the risk of floods in their area, a simple explanation of flood insurance, a guide to accessing affordable insurance (including through specialist brokers if necessary) and a guide as to what to expect from your insurer in the event of a claim. Furthermore, it was felt to be clear that the agencies responsible required more support helping residents in less affluent economic areas, particularly those with high levels of rented accommodation. (See Recommendation 12: Response Based on Demographics Immediately after a flood event, local authorities should review the demographics and tenancy rates of the affected area to ensure an appropriate response mechanism is put in place (Blanc, 2020)).

Question 4 - Do we need to allocate resources to target insurance guidance, progressing dialogue with the sector to understand the need and target engagement?

4.2.5 The CCC (2023) recommend for Wales specifically, that there should be financial support and access to insurance for smaller businesses and poorer households, to gain reduced insurance premiums (p307). In 2021 Defra chose not to follow the recommendation from Flood Re to reduce premiums for properties in lower council tax bands, and instead stated that they would explore other approaches to encourage uptake of insurance (Browning, 2023).

Question 5 - Do WG need to monitor/scrutinise other approaches forthcoming from Defra, are there other UK led mechanisms or does WG need to take the initiative on providing support?

4.2.6 Welsh Government encourages RMAs “to submit business cases for resilience measures on a community scale, such as flood gates or small-scale street improvements where the cost of a major flood defence cannot be justified” (WG, 2020, p78). To draw upon the CCC (2023) recommendations, there needs to be commitment to further and consistent flood recovery funding schemes for businesses (p295), monitoring any adaptation actions taken in response. (To note in England an evaluation of the property flood resilience grant scheme (Collingwood Planning, 2023) found that it had improved the uptake of PFR measures where households were eligible for the grants and had increased protection from flooding in terms of severity of flooding, damage, displacement, and loss. The Collingwood Planning report also documented issues and issued 22 recommendations targeting the effectiveness of the process of delivery and the impacts of the grant scheme.)

4.2.7 In their report for NICW, Miller Research (2023) have also recommended that the “Welsh Government should proactively engage with the insurance sector and other devolved administrations and the UK government, to understand the impact of flood protection measures on insurance premiums and to identify effective investment strategies” (p54). Miller Research (2023) highlight that this collaboration “necessitates an improved dialogue and alignment on resilience measures between governments, insurers, and property owners” (p54).

4.3 Re-Evaluation of the Flood Re Criteria?

4.3.1 Currently, the Welsh Government states in the National Strategy that it supports the principle of excluding post 2009 development from Flood Re, with the aim to discourage any further development in areas at high risk of flooding principle and to direct new homes away from areas identified as medium or high risk through planning policy and TAN 15 (p31). The NICW Land Use Planning and Flood Risk draft report (2024) has questioned any reliable, nationally consistent monitoring data in Wales for development consents in the floodplain (p64). Hence, we do not know how many properties have been built from 2009 and onwards in areas of high flood risk.

Question 6 - In addition to post 2009 development, as the Insurance Industry itself recognises (BIBA), we need a greater understanding of how many householders are affected, what can be done (and what needs to be done) to help those outside of current flood re eligibility criteria, or question whether the eligibility criteria are still relevant?

4.3.2 For SME’s, Sakai (2020) and Sakai and Yao (2023) recommended the establishment of a new joint partnership between the UK Government and the insurance industry for towns at flood risk, with a new scheme focused on SMEs and home-based businesses (the smallest businesses being the biggest losers). They saw insurance as the driver of self-protection if effectively coupled to property flood resilience measures and therefore through to the unlocking of investment in the economy.

4.4 Realism Re Flood Re and Transition Beyond 2039

4.4.1 To conclude, Christophers (2019) alleges that Flood Re, and the “supposed transition” to the market post 2039, “essentially permits the [UK] government to rest up” in: “offloading the problems of managing the growing financial risks of flooding to a mythical market gives the government permission to not itself have to confront those problems today in a substantive, sustainable and no doubt extremely expensive way” (p23).

Question 7 - Should a revised WG strategy acknowledge the wider responsibilities and complexities to enable “the responsibility of a home or business owner to have adequate insurance cover against flooding”, including maintenance of TAN15’s strong stance on development of buildings in current and potential flood zones, PFR and other resilience being mandatory in planning rules (building regulations) and an ongoing dialogue with the insurance industry for a revised (more inclusive) Flood Re scheme?

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