How the flood risk landscape is changing

Almost one fifth (18%) of UK business properties have at least a moderate risk of flooding¹. It’s a huge number, and it represents a significant risk to businesses, supply chains and the economy as a whole. This article explores flood risk in the UK, how to find out if you’re at risk and what you can do about it.

Did you know: flood risk represents the largest protection gap in global insurance?

The flood problem: wet weather and busy builders

UK weather is shifting to a warmer and wetter climate. The Met Office compared the period of 1961–1990 with the more recent span from 2008–2017 to see how weather patterns were changing. Their findings were conclusive: we’ve had much more rain in recent years, with longer wet spells and shorter dry spells.²

This is a big problem because drainage systems have less time to recover, and flood resilience measures will be under stress for longer periods.

Another factor that puts massive pressure on drainage systems is urban development. With few options available for developers, more homes, schools and care facilities are built on land at risk of flooding.

“Up to one in five new homes built between 2015-2018 in some of the areas most affected by recent flooding were built in flood zones” – More than 11,000 homes in England to be built on land at high risk of flooding, The Guardian³.

This development causes two big problems. First, the new properties are at risk from flooding. Second the ground underneath them no longer holds as much water, shifting floods onto nearby areas.

Consider the two weeks of flooding that happened after Storms Ciara and Dennis. Storm Ciara saturated the ground available, then Storm Dennis followed with water that had nowhere to go. The result is widespread flooding.

The insurance issue: businesses ignored

Insurance can be difficult or expensive to obtain if you are in an area with higher risk. There are schemes to help this such as Flood Re in the UK.

The issue with these schemes is that they are often expensive for taxpayers and limited in scope. For example, Flood Re uses an industry levy (taxing all insurance buyers) to provide subsidised flood insurance to homeowners. The problem is that it isn’t available for businesses or homes built after 2009.⁴ Large businesses have better purchasing power and the ability to self-insure. Unfortunately these aren’t luxuries afforded to smaller businesses.

Small businesses are crucial to communities and the economy. According to the Federation of Small Businesses, Small-Medium Enterprises (SMEs) account for three fifths of the employment and around half of turnover in the UK private sector.⁵ However, 40% of SMEs don’t reopen after a flood⁶ revealing a huge threat to SMEs and the potential for huge disruption for millions of people.

Your business: Take steps to learn about your flood risk

There are a few ways to learn more about your flood risk so that you can best prepare for it:

1 – Online resources

The government flood risk check lets you use your postcode and address to find out what the risk of flooding is in the area around your property. See below links for insights. :

• England
• Wales
• Scotland
• Northern Ireland

2 – Ask your broker

Speak to your insurance broker about your insurance options. They will share the options available to you based on your risk. This may include traditional covers, alternative solutions like parametric insurance or a combination of both.

Traditional vs. parametric insurance

Traditional cover is the insurance we are familiar with. You are covered up to the value of the sum insured; the total claim possible under the policy. When your property floods, the insurer will assess the loss and pay you the value of damage caused provided it is within your total sum insured value (minus any excesses or averages).

Parametric insurance does not use the sum insured value. Rather than assessing the value of the claim after a flood, you must pre-select the amount you need when taking out the policy. You are then paid that amount when flooding reaches the depth that you select.

The benefit of this new form of insurance is that claims happen much faster. Parametric claims often take just a few days from flood to full payout. However, you need to consider your potential costs beforehand with the help of your broker to make sure that you get the amount you need, rather than having the insurer do the calculation for you after the flood.

3 – Get a survey

If you’ve established that you have a flood risk (see point 1 or 2) and want more information, the best thing to do is get a flood risk assessment. There are many companies across the country that provide insight on where flooding may come from, what parts of the property are at risk, and simple changes you can make to mitigate the risk. Get in touch with your broker and they can recommend a surveyor best suited to your needs.

Your resilience: what to do if you have a flood risk

First things first, sign up to local flood alerts. These give you early warning when flooding is likely. Go to the government website and get signed up. Getting warning ahead of floods will allow you to enact your flood plan…

Once you’re signed up, create a flood plan. There are some excellent resources on how to do this online including this guide from The Flood Hub. The most important things will depend on the type of property that you’re protecting. Generally you should look at who you’ll need to contact in the event of the flood, how to turn off the utilities like electrics and gas, and whether you need to move expensive stock or equipment if it is still safe to do so.

After creating a flood plan you have more time to think about property resilience. Flood resilience can be broken into two categories: stopping the water getting in, and mitigating the damage that the water causes when it does enter the property. There are experts in various companies across the country that can help develop your resilience. Talk to your Marsh Commercial broker or browse bluepages.org.uk the National Flood Forum’s directory of flood products to get a sense of what’s available.

Insurance: financial defence against flooding

Insurance is the best way to prevent your business becoming one of the 40% that closes after a flood. Your broker has access to all the leading flood insurance solutions – so the best place to start is with a phone call. They can provide guidance on what cover is available, whether that’s traditional indemnity cover or through alternatives such as parametric insurers such as FloodFlash.

1 The FloodFlash Commercial Risk Report 2021 – available at www.floodflash.co/flood-february

2 metoffice.gov.uk/about-us/press-office/news/corporate/2018/climate-extremes-report-supplement

3 theguardian.com/environment/2020/feb/23/more-than-11000-homes-to-be-built-on-land-at-high-risk-of-flooding

4 floodre.co.uk/can-flood-re-help-me/

5 fsb.org.uk/uk-small-business-statistics.html

6 raconteur.net/report/future-insurance-2020