Via Bloomberg, a look at how a first-of-its-kind insurance program bought some in the UK time to shore up flood defenses, but exclusive data shows that isn’t happening quickly enough:

Throughout civilization, humans have sought to hold back the water. Just across from Britain’s east coast, some 65% of the Netherlands should be submerged at high tide. The country is only dry thanks to a manmade system of dykes and pumps, some of which dates back to the 12th century. Much of Florida’s Everglades, once waterlogged marshland, was drained starting a century ago. In South Korea, a multibillion dollar project plans to turn a tidal flat into more than 100 square miles of agricultural and industrial land.

None of those feats of engineering have eliminated the risk of flooding. From collapsing dams to houses falling into the sea, much modern infrastructure has been designed for a climate that no longer exists as each degree of global warming brings more dangerous rainfall. That was evident in recent weeks as hurricanes Helene and Milton left more than 200 people dead and racked up billions in damages in the US.

Last year, the hottest on record, brought 16 extreme storm surges to the UK and one of the wettest three-day periods in government data going back to 1891. Research by its Met Office has found that, if greenhouse gas emissions continue to rise, extreme rainfall events that cause flash floods would become four times more likely by the 2070s. The Somerset Levels are so low-lying that rivers are higher than the ground in many places. People may have to accept that parts of the region will eventually “revert to nature,” says Mike Stanton, chair of the Somerset Rivers Authority.

That hasn’t stopped England from trying to blunt the impact of its rainy weather on homeowners. The government is set to spend £5.6 billion on a six-year building campaign that will bring seawalls, reservoirs, better drainage and green spaces to areas at risk of flooding. And in a world where insurance premiums are skyrocketing and providers have started to avoid extreme weather zones, the British government has found a solution that actually works. It’s deployed an insurance program, Flood Re, that affordably covers the flood risk facing some homes that have been inundated before.

Flood Re’s clever design means it doesn’t cost the government anything: the program made a pre-tax profit of about £24 million last fiscal year. The finances work because everyone who has home insurance makes a small contribution to a levy paid by insurers. Flood Re has been so successful that Australia, Ireland and Canada are considering ways to replicate it.

How Flood Re Works

But Flood Re was only ever intended to be a temporary fix — by law, it must end in 2039 — and it’s only worked so far because of its relatively small scale. The program was conceived as a buffer for insurance companies to better price flood risk while at the same time the UK built up protections. Across the world, insurers are increasingly relying on homeowners and businesses to harden their assets so they can continue to cover them. Flood Re takes that premise and applies it across an entire country.

Simply extending Flood Re isn’t a sustainable option. While the program has only protected about 500,000 of the UK’s 28 million homes so far, its obligations are ballooning fast. A record 288,567 properties entered the program after a series of intense storms last year, cutting its profits by 74%. As floods get worse and payouts increase, it will become more expensive to keep Flood Re going. Eventually, a spokesperson says, “it will hit the limit of public tolerance.”

That means Britain’s bureaucrats now have 15 years left to do what it took the monks and Victorians centuries to accomplish — and they’re far behind. Bloomberg Green analyzed data from the UK’s Environment Agency obtained through a Freedom of Information request. It showed the EA has high confidence only 15% of flood-defense projects funded through the agency’s main investment program will be completed by their deadlines.

“What keeps me up is the scale of the things we’ve still got to do,” says Andy Bord, who was Flood Re’s chief executive officer for almost eight years before stepping down in July. “It’d be a massive failure,” he says, if the UK gets to 2039 and Flood Re can’t smoothly exit the market. Even though the government has doubled its investment in flood defenses, that’s only aimed at keeping risks flat. “We need to see a significant reduction in flood risks,” Bord says.

Insurance premiums are a price signal for risk. If the cost of your new life policy becomes more expensive because your cholesterol’s gone up, it might motivate you to eat better and exercise more. But what if you could take a pill that brings the readings, and your premium, down? You might be less incentivized to change your lifestyle, or forget about the threat altogether. Similarly, Flood Re allows homeowners, insurers and banks to ignore the dangers of flooding — for now.

Paradoxically, a program born out of concern about future floods has made it harder to galvanize flood-protection investment in the present. “There’s a moral hazard with Flood Re in place,” says Kemi Bello, an actuary for insurer Sompo International who has studied the program extensively. Homeowners don’t feel the need to take action — or push their officials to do so — as long as they can get affordable insurance. “We need to be looking at flood resilience at a grander scale and before a flood has happened,” she says. “All of that takes time.”

On the night her house flooded, Paula Buchanan stayed up until 2:30 a.m. with her husband and son. They watched the water make its way across the garden and into their three-bedroom house in Retford, a market town of fewer than 24,000 people in the East Midlands that’s plagued by an overflowing river. Foul-smelling water quickly rose to a foot high inside the house, contaminating everything it touched and soaking the plaster off the walls. It took nine months and more than £100,000 in renovations, legal fees and rent before the Buchanans could move back in.

That was last October. Two subsequent storms arrived shortly after, leaving behind more than £500 million in insurance claims. Before Flood Re was introduced, there were years when Buchanan went without home insurance as premiums soared after the UK saw devastating floods in 2007. Now she pays less than £1,000 ($1,300) a year.

But Buchanan knows that’s just a Band-Aid. She and her neighbors have installed special bricks with vents that seal automatically when water levels rise and barriers on their patio doors, yet flooding still happens. Six years ago, the local council had proposed building a reservoir in Retford to help store water during heavy rain. But the project was scrapped by the EA last July after supply chain issues raised costs.

Out of options, Buchanan fears she’s stuck with an uninsurable and unsellable house. One reason she was given for the decision to cancel the reservoir project was that it risked causing flooding elsewhere. “What the agencies have done in this case is tantamount to abuse,” she says. “They’ve allowed us to flood, knowingly allowed us to flood, to save other areas.”

Retford Remains Vulnerable to Flooding

A reservoir to store water during heavy rain was scrapped after costs soared

Philip Duffy, the EA’s chief executive, told a hearing in parliament that Retford was an example of an area where it’s difficult to plan defenses because “the way in which the flooding happened was extremely atypical.” The agency says it’s looking at a range of other options and has commissioned additional modeling to understand the flow of water from the dyke behind Buchanan’s house and the river running through Retford.

Yet, the EA faces a daunting challenge as inflation raises the cost of infrastructure projects and Brexit makes it harder to find skilled workers. The EA aimed to offer at least 336,000 homes some degree of protection from floods by 2027. An audit released in October 2023 showed only 200,000 homes will benefit — 40% less than promised.

EA officials track the progress of hundreds of flood projects in England using non-public “confidence scores” from 0 to 4 that assess three things: whether the projects have secured funding from outside partners, whether they will impact the number of homes envisioned, and whether they will be completed in time. A dataset provided by the EA, covering more than 1,900 projects, shows about a third of them have received a score of 1, 2 or 3 on the last metric, meaning there were at least some concerns they wouldn’t meet their deadlines. (About 28% of the projects, 541 of them, were not given a confidence score related to their delivery dates.)

Even the 200,000 homes cited in the audit aren’t guaranteed safety. The EA measures success by how many homes are “better protected.” That doesn’t mean the properties will be flood-proof, just that they are assessed to have lower risk than before. When judging projects on whether they will deliver on the number of homes they aim to shield, the EA only had high confidence in projects linked to 116,000 properties — about 6% of the 2 million homes in England the EA estimates are at peril from floods.

England’s Flood Defenses Aren’t Going Up Fast Enough

The UK’s Environment Agency only has high confidence that 15% of flood-defense projects will be delivered on time. The EA assigns confidence scores that represent the likelihood a project will be completed by its due date.

“We know we can’t protect everybody,” Caroline Douglass, the EA’s executive director of flood and coastal risk management, said at a press conference earlier this month. “We are doing our best to spend what we have and make it stretch as far as we can.”

Enlisting the help of big business would be one sure-fire way for the EA to make its flood-defense plans work. The agency is only allowed to unlock funds when a certain share of a project’s costs are paid for by outside groups such as local authorities, private investors and other government departments. That requirement is one of the biggest obstacles to getting projects over the line, according to Mark Stratton, who advises the Chartered Institution of Water and Environmental Management, an industry group. “There’s never been more funding available from [the central government], but we often can’t access it,” he says.

It’s an approach that can disadvantage less-populated areas like Retford, where it’s harder to demonstrate a project will benefit a large number of homes and people. But the same calculus works in favor of Bridgwater, a town in Somerset that’s undergoing rapid industrial development.

Bridgwater, Somerset Looks Forward to a New Tidal Barrier

Rapid development helps justify an expensive flood defense project

Neither spiraling costs nor a timetable that keeps slipping have made local officials in Somerset worry about funding for a tidal barrier to stem water from the nearby Bristol Channel. With a price tag of more than £200 million, the project is one of the most expensive in the EA’s dataset. A spokesperson for the Somerset council says it has the “greatest certainty” the barrier will be completed. Local officials have already committed £3 million to the plan as part of a successful bid to get Agratas, an arm of India’s Tata Group, to build a £4 billion electric-vehicle battery gigafactory that will create 4,000 jobs. Dozens of homes have been built on the banks of the River Parrett, which would benefit from the tidal barrier.

A post-Flood Re world is taking shape in Ealing, a leafy west London neighborhood. Young families are drawn to the area because it’s relatively affordable — by the city’s standards — and has decent schools and low crime rates. A newly-built Tube line makes it easy to get to central London. Apartment blocks are going up all over the area, says Ben Morris, a local resident who advocates for better river management. There’s so much demand that “the council are struggling to find places to build,” he says.

That’s forced officials to turn to high flood-risk zones, as long as developers can show they’re making some attempt to mitigate the danger. One project in particular has troubled and amused Morris and his neighbors: a 295-apartment building planned for a section of the Brent River Park, a floodplain that protects the area during heavy rain. To make up for the loss of natural sponge that will result from paving over open land, the plan is to use a nearby community center’s carpark as a flood basin — meaning everyone would have to move their cars if a bad storm looms. Ealing’s council says it will take appropriate safety measures, including notifying drivers ahead of a potential flood.

“It’s the kind of idea where, as soon as you hear it, your mind is just full of comical scenarios of how it could go wrong,” says Morris. “It suggests a degree of desperation and wishful thinking. It’s a kind of fantasy plan.”

As climate change accelerates, the new Labour government has found itself caught between opposing promises that helped it cinch a landslide victory. It vowed to “get Britain building again” to grow its economy, a task that risks increasing carbon emissions, while also making good on the nation’s green promises. Meanwhile, local authorities are under immense pressure to erect more housing to combat a severe shortage, but all that new concrete threatens to intensify flooding because there will be fewer natural spaces to absorb rainfall.

None of the hundreds of thousands of homes currently being built will be eligible for Flood Re. In a bid to discourage new developments in flood-prone areas, Flood Re doesn’t cover homes built after 2009. Yet at least 8% of new homes have been built in flood zones over the last decade, according to the insurer Aviva Plc.

London’s Ealing Caught Between Housing and Flood Crises

Locals are worried about a high-rise building planned on a flood plain

Ealing’s predicament is set to be replicated across the UK if increasing flood risk isn’t offset by protective infrastructure. That will make homes more expensive or impossible to insure, threatening home prices and the ability to get a mortgage. Things could revert back to the situation in 2007, before Flood Re was in place, when many owners of the 55,000 homes that flooded during catastrophic storms saw their insurance premiums soar — some to as high as £30,000 a year. It then became a struggle to sell their homes because prospective buyers couldn’t afford coverage.

The five flood-defense projects underway in Ealing have all been given a low-confidence rating by the EA. Earlier this year, a torrential downpour overwhelmed sewers in the neighborhood, inundating local gardens and roads.

Nationwide Building Society, the UK’s second-biggest mortgage lender, has already stopped lending for some homes that it finds are at risk, says Rob Stevens, the company’s head of property risk. His team uses postcode-level mapping to identify flood risk from a very early stage in the buying process, which means they can make a quick decision and relay that to a customer.

Stevens sometimes calls up buyers personally to deliver the news, especially if the customer says they don’t understand the problem. “If we’re doing a 40-year mortgage term and there’s something there that I know could fundamentally change for the customer, I can’t not know that,” he says.

Flood Re’s approximately 55 employees, based in a co-working space in London’s financial district, now spend more of their time figuring out how to get homeowners to do more to protect their own properties. In 2020, the program launched a Build Back Better campaign to give flooded homeowners as much as £10,000 to install things like flood doors or replace easily destroyed wood materials with alternatives such as porcelain tiles. About 70% of insurers in the UK now offer similar incentives.

But getting homeowners to take flood risk seriously is still a challenge. By its own description, Flood Re works behind the scenes and most people don’t even know that they benefit from it. Research by the Red Cross shows that flood-risk awareness in the UK is low, even among those living in areas where the danger is high.

Flood Re wants to make that risk more transparent by having insurers state in their policies if a customer is using the program. It also wants to institute a certificate for each house that quantifies its flood vulnerability. These would be similar to the existing energy-performance certificates given to each UK home so that potential buyers can easily gauge factors like insulation and energy efficiency.

Such a measure could have a negative impact on the property market, at least initially. The situation draws parallels with the UK’s cladding crisis, which started in 2017 after the Grenfell Tower in London went up in flames because of a poorly designed insulation system and killed 72 people. Immediately after the blaze, banks stopped lending on high-rise buildings unless they had a fire-safe certification. Nearly eight years later, hundreds of thousands of people are unable to sell their apartments because they cannot obtain the certificates.

A Flood Re spokesperson says there’s “real potential” for flood performance certificates to empower homeowners to manage risk, as well as help insurers, lenders and public authorities do their jobs. (Stuart Logue, Flood Re’s interim CEO, declined to be interviewed.)

“We need to be aware of unintended consequences that these kind of policies have,” says Konstantinos Chalkias, a senior lecturer at Birkbeck, University of London and co-author of Disaster Insurance Reimagined. “If someone buys a flat and then all of a sudden they have a certificate that says that it’s at high risk of flooding, then instantly you have a different valuation for that flat,” he says. “The next question is who does something about that flood? Who pays and who takes responsibility?”

Another way to look at it is that Flood Re has artificially inflated the value of flood-prone homes if the UK doesn’t build up its defenses fast enough. So a correction, however painful, is necessary. Research by the Bank of England shows that, before Flood Re was introduced, flooded properties saw their prices fall by an average of 1.6% and were far less likely to sell. Flood Re increases property values by just over £4,000 on average, effectively subsidizing house prices to the tune of at least £212 million per year.

In hindsight, even some beneficiaries of Flood Re question the wisdom of shielding homeowners from risk that will likely become inescapable in the future. James, 46, bought a three-bedroom cottage on the Welsh border in December 2022. It’s flooded twice since then — the first time just a month after his purchase went through. He’s now spending tens of thousands of pounds to build a wall around the house. With help from a £10,000 Build Back Better payment, he’s expecting to install pumps behind the wall.