Annual flooding losses set to reach £1bn
The cost of individual major flooding events is also rising, according to the research by SearchFlow who quote the Environment Agency’s estimate that a major coastal flood in the Humber estuary could cause £266m worth of damage. As sea levels rise, this could increase to £1.4bn by 2040.
The Environment Agency predicts that in the next 30 years sea levels will rise by around 40cm so without improvement in flood defences this would increase the number of properties at significant risk of flooding in the east of England by 48% – by 2040 the cost of a major coastal flooding event could reach £16bn. Naturally, losses of this level would place a heavy strain on the insurance market.
“The twin impacts of climate change and ongoing property development mean the danger of flood liability is growing rapidly,” said Richard Hinton, business development director of SearchFlow. “So great is the potential risk from rising sea levels and construction on the floodplain to accommodate a rising population, the UK’s flood liability could come to dominate the global reinsurance market. In practice, that would mean many in high risk areas would be unable to obtain insurance at all, which would significantly reduce the value of their properties and potentially could put homeonwners in breach of their mortgage agreements.
“Many property owners don’t realise the extent of the danger they face. It’s no longer safe to assume that historically low flood risk is an indicator of what to expect in the future. Particularly in coastal areas and parts of the UK which face significant risks of flood damage, it’s essential those purchasing property are fully aware not just of the risks they face today, but of those that will develop in the coming years”.
Currently the UK spends £570m per year on flood defences to protect the one in six properties that suffer flood risk. At the present level of spending, SearchFlow’s research indicates the annual cost of flooding could rise to £13.5bn per year. To mitigate the growing risk from flooding, the Environment Agency calculates spending on flood defence must be increased by £20m each year to at least £1.04bn annually by 2035.
According to the Association of British Insurers, the present level of spending on flood defences is insufficient to prevent 43% of flood defences being in a ‘moderate, poor or very poor’ condition. The Environment Agency calculates that spending on flood defence represents good value for money, as every £1 spent on flood defence reduces the damage from flooding and coastal erosion by £8.
“The UK is reliant on flood defences to protect the properties at risk of flooding,” said Hinton. “Although hundreds of millions per year sounds like big spending, it’s a drop in the ocean compared to the cost of the damage the UK faces from flooding. Every year the government fails to increase spending on protection from flooding condemns property owners to potentially catastrophic losses down the line. In the meantime, all property owners can do is ensure they have a full understanding of the risks they face”.
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