Posts Tagged ‘UK Flood Defenses’

Penny Wise, Pound Foolish

Wednesday, October 20th, 2010

In connection with austerity measures, the UK government reduced spending for flood and coastal defenses, a move that elicited sharp criticism from insurance industry trade groups.  Nick Starling, the Association on British Insurers director of general insurance and health said: “The Government is right to recognize the importance of continued investment in flood defenses. But we are disappointed that this will not be maintained at current levels, given the scale of the problem and the wider economic benefits provided by flood defenses to our communities and businesses.” The UK, like the U.S., China and other major economies, has experienced severe flooding this past year. Fortifications against flood risk makes insurance affordable in vulnerable communities. It also reduces the disaster relief burden the government would shoulder should severe floods occur. The fiscal pressures on governments result in aggressive public risk taking: if the gamble pays off, the taxpayer saves money. If it doesn’t, the losses are greater than they would have been with an investment in systems for risk mitigation. It is no different than in the U.S., where many state governments are foregoing reinsurance coverage altogether.