An Insurance Perspective

1
An Insurance Perspective

• Professor David Crichton
• Association of British Insurers

2
World wide insurance losses
Natural Catastrophe Losses - Decadal Totals
Source Munich Re, January 2000
3
UK Weather Claims Costs
Source ABI Statistics Bulletins
4
UK Storm Claims

• October 1987
• 1 million claims, cost 1,400 million
• January/February 1990
• 3 million claims, cost 2,400 million
• Reinsurers paid 60 of the claims costs then.
  Now they would only pay 20
• 1993 Braer Storm, 915 millibars (European
  record low, 912 millibars)

5
UK Subsidence - nearly 1m a day
million incurred costs
UK Domestic subsidence total cost over last ten
years 3338m
Source ABI Statistics Bulletins
6
Increased Flooding?
2020s
2050s
2080s
Medium-low
Medium-high
Source UK CIP Technical Report No 1
7
Government and insurers...

• May 1998, Sarno floods in Italy, the Italian
  Government paid the equivalent of 150m Euros in
  compensation to victims.
• April 1998, Midlands floods in England, insurers
  paid the equivalent of 232m Euros in
  compensation to victims.
• - but many low income families in the UK cannot
  afford insurance.

8
The Risk Triangle
A Framework for Adaptation?
RISK
Hazard
Vulnerability
Exposure
9
Example Flood Risk

• Insurers are becoming more pro active
• They are increasingly taking steps to manage
  vulnerability and exposure
• ABI wants to help Government to manage hazard.
  It has funded major research projects and shared
  the results with Government.

10
Dealing with Hazard

• New methods for calculating return periods
• Remote Sensing for better flood mapping
• Importance of SUDS
• Analysis of sea defence capability
• Guarantee of continued cover but only so long as
  Government is seen to be taking action.

11
Dealing with Vulnerability

• National Flood Claims Database - 25 insurers
  contributing
• Importance of building standards
• Resilient reinstatement?

12
Dealing with Exposure

• Scottish NPPG 7 - Flood Appraisal Groups
• Draft PPG 25 for England
• Financial Services Authoritys new policy.

13
Adaptation Priorities

• More resilient, mandatory, building standards and
  quality assurance inspections, for new build,
  reinstatement and renovation.
• Stricter planning control in flood risk areas and
  on contaminated land.
• Take climate change into account in design of
  drainage, flood defence, and buildings.

14
To Conclude...

• The insurance industry has a role to play.
• The ABI welcomes dialogue with the Government and
  its agencies.

Association of British Insurers www.abi.org.uk
david_at_crichton.sol.co.uk