A recent report by the London School of Economics and Political Science provides for a stormy forecast for Britain’s new proposed flood insurance programme, largely in part due to climate change.
Flooding is perhaps one of the biggest natural disasters the UK faces. However, the ability to insure against this risk has provided uneven and ineffective results, much like it has in other places including the U.S. Consequently, the UK government and the Association of British Insurers (ABI) have a proposed a scheme to stabilize flood insurance premiums.
Under the scheme, known as Flood Re, everyone will pay a flat £ 10.50 levy on all residential property insurance policies regardless of flood risk starting in 2015. This will provide the program with approximately £ 180 million per annum. This will have the effect of capping the premiums for those in high risk flood areas.
The scheme is expected to protect approximately 500,000 UK homeowners who are situated in high risk flood areas. However, the LSE report states that the current Flood Re plan fails to take into account any increase in the number of homes that will be designated as high risk for flooding due to climate change. The LSE estimates that the number of homes in high risk flood areas could increase to between 450,000 and 800,000 by the 2020s (assuming that there is no additional building). This number could then rise to between 500,000 and 1.5 million by the 2050s. The current financial plan would be insufficient to cover this many additional homes.