Flood mitigation reaps five times return on investment

Flood mitigation reaps five times return on investment

Flood mitigation reaps five times return on investment Two flood mitigation projects in Queensland will bring economic benefits at least five times more than their cost, a new analysis produced in conjunction with Suncorp has found.

The analysis, Economic benefits of flood mitigation investments by services firm Urbis, shows that for capital and running costs of $5.9m, St George’s flood mitigation project will deliver protective benefits totalling $31.6m over the next 50 years for a benefit cost ratio of 5.4. Roma’s project cost is $16.4m, delivering protective benefits totalling $81.1m over the next 50 years for a benefit cost ratio of 4.9.

Suncorp Personal Insurance executive general manager Lisa Harrison said the analysis excluded other benefits that are hard to quantify such as prevention of death and injury, emotional trauma and lost heritage value.

She said the report complemented the findings of the Productivity Commission’s recent draft report, which recommended significant increases in Federal Government funding on natural disaster mitigation.

“Councils can’t do it all themselves,” Harrison said. “Local government must be given more support to protect their communities. They need the funding to make it worthwhile and many councils struggle to access the expertise to plan the solutions that work best for them.

“The commission also calls for more targeted studies to identify critical areas of potential investment and this report helps fill the gap in the knowledge base.”

“We know effective flood mitigation protects vulnerable communities, safeguards property, builds stronger economies and, ultimately, reduces the cost of insurance,” Harrison said.

“And as these new figures show, if properly done in the right place it’s one of the smartest investments governments can make.”

Harrison said analysis also showed a 2.2 benefit cost ratio for Grafton’s much older levee infrastructure which has been protecting the town from flood since the 1970’s.

“Our experience in disaster-prone communities tells us that it’s much better to invest once rather than pay many times over," Harrison said.

"Over time, mitigation pays for itself, even old levees with lower risk protection as shown in Grafton.

“Many communities in Queensland and Australia-wide could be better protected and pay lower premiums – with the right funding and government policies."
  • William 16/10/2014 9:41:16 AM
    What about country NSW towns like Wee Waa who have had flood mitigation in place for years and still pay through the nose for their premiums and cost still rising - typical, all words.
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  • Greg Cottrell - Insurance Professional Dinosaur 20/10/2014 12:45:51 PM
    William, I sympathise with you, Wee Waa is one of many, but you will find the reports and particular the article is only focused on themselves, "savings to the Insurer via reduced claims payouts", not premium gouging. There is no social conscience when it comes to the Insurance Industry any more (don't believe marketing campaigns they are just what they are), even though in the past the industry has had a very important role to play in this regard, it is a bankers model now, "as much profit as possible above all else".
    But I do agree with the report that mitigation is a much more viable option than repeating disasters, but as usual, who is going to pay?
    Governments at all levels have to take more responsibilities in both mitigation of current exposures, but also preventing exposures on where infrastructure can and cannot be built.
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