Swenja Surminski, Senior Research Fellow - London School of Economics

The London School of Economics (LSE) is leading the case study on “Flood risk and climate change implications for MSPs”. Could you explain us why this case study has been set up and what are its objectives?

The London case study investigates the existing public-private flood insurance partnership and the proposed new insurance scheme Flood Re and explores how this could influence London’s resilience to major flood risks today and in the future. We are particularly interested in the incentives for risk reduction among different partners, to support flood defences, household level flood protection, and spatial planning and zoning. We investigate how existing and proposed insurance schemes address this, and also look for some innovative financial instruments. (1)

In addition we explore a second MSP, which is focused on London and represents stakeholders beyond insurance and government: The London Climate Change Partnership (LCCP) consists of a range of public, private and community sector organisations, collaborating to increase London’s climate resilience.

The case study is conducted jointly with University of Oxford (Prof Jim Hall), who are developing a agent-based-model to assess insurance-related instruments; the behaviour between, and motivations of, different stakeholders involved in the risk sharing arrangement; and mechanisms to enhance resilience through an increase in uptake of such instruments. The model aims to provide evidence to support different flood risk management strategies and investigate consequences of different policy options.

Among other factors such as i.e. urbanisation and population increase, climate change may raise flood risks in Europe and more especially in London. How Multi-Sector Partnerships (MSPs) could help in preventing and fighting risks of flood in London?

The flood insurance MSP contains some elements of risk reduction, for example through requirements for government to invest in flood defences and share flood risk data, but the practice shows that the link between risk transfer and risk reduction is very limited. For the LCCP there are examples of how this partnership is aiming to increase London’s resilience, not just from flooding. Activities include: collecting and sharing information about expected climate change impacts on London and possible adaptation options; raising awareness of organisations and individuals of the impacts of climate change; facilitating and encouraging adaptation in London; informing policy with local evidence; monitoring London’s preparedness for climate change; and seeking opportunities to improve resilience.

For the ENHANCE case study one specific focus is on the GLA’ led Drain London work, which has been supported by LCCP and which is an example of local authorities working together to deliver on surface water flooding, establishing partnerships and knowledge networks. It is a public based organisation established by the Mayor of London and run by the GLA. Its overall goal is to help manage and reduce surface water flood risk in London by improving the knowledge of surface water drainage systems and identifying areas at greatest risk of flooding.

Your case study relies on strengths and expertise from several key actors. Can you explain who are they, their specific roles and possible disagreements?

We are particularly interested in the relationship between insurance industry and government – “How can risk transfer reduce today’s and future climate risks – not just in financial terms, but also with regards to the underlying physical risks, as a tool to help individuals, communities and countries to adapt to a changing climate? “

Looking at current evidence from the literature and the market the answer to this seems to be ‘yes in theory, not really in practice’. Surminski and Eldridge (2014) concluded that the existing and newly proposed flood insurance schemes in England offer very limited scope for physical risk reduction. One aspect that warrants further investigation is the role of other stakeholders, whose action can determine future risk levels.

The most relevant group are deemed to be property developers and there is a wider range of stakeholders in the development process, from the concept of a building to actually delivering it on the ground. This is the reason why we are now investigating the LCCP. Compared to the insurance partnership it is much broader in terms of membership, but also narrower in terms of focus on London. It was established in 2002 as a centre for expertise on climate change adaptation and resilience to extreme weather in London. The partnership has focused on building resilience within and between sectors and is comprised of public, private and community sector organisations and actors engaged in preparing London for extreme weather and predicted climate change impacts.

In your views why should the insurance industry be involved in MSPs?

Insurance has a role to play – but it is not the only private sector that should be involved. We are particularly interested in the role of property developers.

Are they any political statements in favour of MSPs at local level? If yes, were they followed by concrete actions? What kind of actions were / are undertaken?

There is a big drive towards public-private collaboration – it has become a ‘well-rehearsed mantra’. What is less clear is how to realize it. This is where we hope to share some insights through our work.

What deliverables do you expect from the enhance project regarding flood risk management?

Our assessment of both MSPs has the following aims:

• To influence London’s resilience to major flood risks today and in the future;
• To understand the risk incentives in place for stakeholders to invest in flood defences, household level flood protection, and spatial planning and zoning;
• Investigation of existing and proposed flood insurance schemes and innovative financial instruments;
• Devise a qualitative analysis of relationships, governance and risk levels and a more quantitative oriented agent-based-model.

In the longer term, how your contributions would be useful to prevent and overcome other flood risks in Europe?

Climate change needs to be considered in the efforts to devise new instruments and partnerships. The case of flood insurance in the UK shows how difficult this is. See our blogs below (2) (3). Clearly this is relevant for other countries and hazards – this is why within the ENHANCE project and also externally collaboration amongst researchers is so important.

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References:

(1) Surminski, S., and Eldridge, J. January 2014. Flood insurance in England – an assessment of the current and newly proposed insurance scheme in the context of rising flood risk. Working paper, Centre for Climate Change Economics and Policy, Leeds and London, UK. “Download PDF of paper(Download PDF of paper)”:http://www.cccep.ac.uk/Publications/Working-papers/Papers/160-169/WP161-Flood-insurance-in-England.pdf

(2) Surminski, S.: Managing flood risk: Why flood insurance needs to send the right signals. London School of Economics, 14 February 2014.

(3) Surminski, S. and Crick, F.: The new flood insurance scheme will not cope with rising flood risk due to climate change and building in floodplains. London School of Economics, 20 September 2013.

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Note to readers:

Swenja Surminski is Senior Research Fellow at the Grantham Research Institute on Climate Change and the Environment, part of the LSE as well as a member of the Center for Climate Change Economics and Policy (CCCEP).

Swenja’s current research projects focus on public-private partnerships for managing natural disaster risks in Europe (as a part of the EU’s FP7 project ENHANCE), UK flood insurance, the costs and benefits of climate change in Russia; loss and damage as a new UNFCCC concept and the role of the private sector in climate adaptation.

Swenja has a PhD in Political Science/Economics from Hamburg University for her work on “Climate Change and the Insurance Industry” in 2000.