Insurers have welcomed the NSW Government’s plans to raise the wall of the Warragamba Dam by 14 metres, which will reduce the flood risk in the populous Hawkesbury-Nepean Valley.

NSW Premier Mike Baird says raising the wall should reduce potential economic impacts from flood risk in the region by about 75%.

Last week Mr Baird announced $58 million in funding for the first phase of the plan, to be allocated in tomorrow’s state budget.

Around $30 million will be spent on developing detailed concept designs, environmental assessments, community consultation and preparing a full business case to raise the dam wall.

The remaining $28 million will be used to immediately upgrade the flood risk response in the area.

This will include rebuilding local roads to improve access to evacuation routes, along with better evacuation road signs, devising more efficient flood response and recovery arrangements, developing a better forecasting model, increasing community awareness of the flood risk and integrating flood risk management with regional planning.

This work will take place between 2016 and 2020, with the full business case for raising the wall due to be completed in 2019.

Final approval for the project, which is estimated to cost $690 million, will not be granted until the business case has been received. But Mr Baird signalled his commitment to the project by adding that “the NSW Government is fully committed to alleviating the flood risks posed in the Hawkesbury- Nepean Valley”.

Construction will then take three to four years, with the project not expected to be completed before 2023.

The Hawkesbury-Nepean Valley Flood Risk Management Taskforce, which has developed the plans, says it expects “a reduction in flood risk would be reflected in reduced flood insurance premiums”.

Insurance Council of Australia (ICA) CEO Rob Whelan says the council will provide data and guidance to assist the taskforce.

“Detailed flood mapping held by ICA indicates this step will help to protect tens of thousands of homes from inundation should the existing dam wall be unable to cope with a period of sustained, significant rainfall,” he said.

“This decision aligns with ICA’s consistent call for governments at all levels to invest more funds in pre-disaster mitigation infrastructure, rather than spending vastly greater amounts on post-disaster reconstruction and recovery efforts.”