The Great Debate UK

Britain’s floods: How do we pay the £14 billion bill?


Nikolas Scherer is researcher at the Hertie School of Governance and Visiting Fellow at LSE IDEAS. The opinions expressed are his own.–

In some parts of the United Kingdom, the recent floods are the worst on record. Since December 2013, over 5,800 homes have been flooded in England alone. The cost to the UK economy had been estimated at as much as £14 billion, from damage, lost business and general economic slowdown. Whatever the exact figures, the bill will be immense.

At some point, the government has to consider where to get the money from.

There may be lessons to be learned here from a recent trend in the developing world, which has been to use climate insurance, or more technically speaking, index insurance instruments, to hedge against adverse weather events.

In contrast to traditional insurance, the payout is predetermined and depends ultimately on the realisation of a specific weather event – for example a certain wind-speed measured at a particular weather station for a given period of time – and not on the ex-post assessment of a loss adjuster. Pay-outs can be made very quickly and allow a quick influx of capital on a state’s balance sheet: money with which the government can begin the rebuilding process.

from Reuters Investigates:

Japanese quake cost bad, but far from the worst

By Ben Berkowitz

INSURANCE/JAPANThe March 11 Great Tohoku Earthquake in Japan was a tragic disaster of historic proportions -- but from a purely financial standpoint it pales in comparison. (For a special report on insurers, click here.)

Estimates are still coming in but it seems likely the quake will end up ranking as the costliest of the last generation in insured losses, surpassing even the Northridge earthquake that struck southern California in 1994. (The one that collapsed a number of major freeways, by way of reference).

from UK News:

Pru’s Asian misadventure: a cautionary tale

PRUDENTIAL/By Clara Ferreira-Marques

Prudential's ill-fated Asian adventure has left the company and its management badly bruised. But it has offered at least two valuable lessons for ambitious executives tempted onto the acquisition path by post-crisis, "once-in-a-lifetime" deals.

Lesson one: It's not 2007 any more, Toto.

Lesson two: Disregard shareholders at your peril.

On the first, bold mega-deals that once impressed the market now seem to mostly unsettle both investors and regulators.

Barclays shouldn’t vendor-finance iShares


REUTERS– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

Barclays’ hasty deal to sell iShares in April served its purpose. The $4.4 billion price-tag boosted the bank’s capital, thereby allowing it to dodge the government’s insurance scheme. Barclays should now seek better terms on the deal.