Climate control

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Lobbying successes on sewers and flood defences are paving the way for a busy campaigning year in 2005 for the Association of British Insurers. Sebastian Catovsky explains all to Ana Paula Nacif

At the end of the year, Sebastian Catovsky will be heading back to the Department for Environment, Food and Rural Affairs. It will be the end of his two-year secondment as a policy adviser for natural perils at the Association of British Insurers but 2005 will not see him winding down. With pressing environmental issues, such as climate change, flood defence and the Thames Gateway making some headway in government policies, Mr Catovsky has got ambitious plans to make sure the insurance industry remains at the heart of the matter.

"The UK industry has come a long way but there are still many challenges ahead," he says. "The government has taken us seriously on issues such as sewer flooding, the Thames Gateway and flood defences. Last year we got the exact outcome we lobbied for, which shows the industry is getting its voice heard and becoming an important stakeholder to help find solutions for those issues."

There is no doubt the industry needs some solutions and fast. According to the ABI, weather risks are already increasing by 2% to 4% per year on household and property accounts due to changing weather. Claims for storm and flood damage in the UK have doubled to more than £6bn between 1998 and 2003, with the prospect of a further tripling by 2050. River and coastal flooding damages could increase from £1bn per year to £20bn.

Government influence

By lobbying for better planning for house development, in particular the Thames Gateway, and more investment in flood defence, the ABI hopes to give the insurance industry more kudos to influence government policies.

The ABI is also planning to set foot on the international stage, with the publication of a major piece of research on the costs of climate change later this year. According to Mr Catovsky, the ABI wants to tap into the industry's international presence and influence in order to push the debate forward in terms of available solutions.

"This year we want to make an important mark internationally. We will be assessing the financial risks of climate change, which, amazingly, is something no one has ever done before," he explains. "The insurance industry can help others to understand the true risks of climate change and the type of solutions for society. We don't have a moral stance on climate change but we can communicate the likely future risks and how they can impact the industry and the economy."

In Europe, the work on climate change will concentrate on assessing which markets are the most vulnerable. "That ties in really well with the UK presidency in the European Union for the second half of the year," says Mr Catovsky. "The first half will be G8-focused, concentrating on the US and developed countries; in the second half, we will be working more at European level."

In the past few months, the South-east Asian tsunami and torrential floods in some parts of the UK have underlined just how vulnerable economies and society can be in the face of such powerful natural disasters. For the industry, it is not only about picking up the pieces but also trying to deal with uncertainty through risk assessment and mitigation.

Extreme events

Mr Catovsky says that despite the devastating consequences imposed by extreme bad weather over the past few months, the market remains "comfortable".

He explains: "We had Boscastle and Carlisle - this kind of extreme event will always happen. And this kind of event is really what insurance is there for. What is worrying is if the trend continues with increasing frequency and we don't take steps to reduce the risk."

Risk mitigation and reduction is exactly what the ABI has been fighting for in the Thames Gateway project and a new set of regulations will be published on 1 February. With housing shortages, especially in the South-east, and government plans to increase the number of new houses, the ABI put a considerable amount of pressure on the government to consider appropriate flood management on land and planning of new developments, particularly in the Thames Gateway. It also developed guidance for the new development, setting out key principles for flood management and guidelines on flood-resilient homes.

"The Thames Gateway is a challenge for insurers because that part of London is prone to tidal flood risk, as well as some fluvial flood risk," explains Mr Catovsky. "And although London is defended to a very high standard, there is still a one-in-a-thousand chance of flooding. Insurers need to think about the worst-case scenario. Also, if we are going to manage flood risk in the estuary, we should go for the lower risk areas first."

He believes that such work has helped to strengthen the industry's reputation and relationship with the government. "It changed the government's view on our position of being negative and anti-developers to being part of the solution."

The ABI has been arguing for a strong and transparent planning system.

"We will continue to lobby this year. There are loopholes in the system and a significant number of developments going ahead, which should be reviewed. At the moment, 20% of planning applications refused by the Environment Agency are approved by local authorities. And the Environment Agency is not even consulted in about half the applications."

Defence budget

Another key area is flood management investment. The ABI welcomed the government's move to keep its annual flood defence budget at £564m for the next three years, which is supposed to deliver flood protection to 80,000 houses. It is now lobbying for more meaningful information to be made available about how the money is being spent.

"In terms of flood management, the big thing for this year will be making sure the government uses the extra investment effectively and wisely and actually delivers increased flood protection to a substantial number of homes."

Mr Catovsky recognises this may not be an easy task and that it may take some time for the government to come up with the goods. "We are not saying the government should have it already, but getting those measures, and working with the government on that, would be a big step for the industry."

With the various campaigns last year bringing a positive outcome, Mr Catovsky remains optimistic that in 2005 the ABI will have an opportunity to push things even further. "We are very proactive in the UK and we lobby the government very hard. With the Thames Gateway and the housing agenda, climate change and flood management work, we will have a very exciting and interesting year."

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