Government moves closer to flood solution

Government’s plans to provide affordable and accessible flood insurance for all that were announced today have been welcomed by insurers.

Ageas UK chief executive Barry Smith commended government on its move towards a levy type solution, but warned that more work needed to be done during the summer recess to maintain the momentum and find a long-term solution for both insurers and government.

“Of course, we will continue to cover our customers as that detail is being worked through,” he said.

“The last few weeks of flooding across the country have shown that this continues to be a very real problem for many communities and today’s report from the Committee on Climate Change reinforces the need to create a joined up government policy on flood insurance, investment in flood defences, building regulations and planning to tackle this issue effectively.”

Environment Secretary Caroline Spelman said that both government and insurers were continuing to make progress on the future of flood insurance.

Flooding insurance is only available under the current Statement of Principles agreement between the Government and the industry which expires in June next year and Defra is under pressure to make a decision soon.

As part of discussions, government is considering how the existing cross-subsidy can be adjusted to make sure insurance prices remain affordable.

Most insurance companies already raise a small sum from policy holders to cover the cost of insuring homes at high risk of flooding.

The insurance industry has asked government to formalise this arrangement, so that all households can continue to get affordable insurance.

The government said that any new approach would not place extra costs on policy holders or the taxpayer, but would instead use money available to the insurance industry by formalising the voluntary arrangements already in place.

Spelman said: “We want to go further than the Statement of Principles to reach an agreement that ensures both the availability and the affordability of flood insurance for the first time.

“The insurance industry and the government, working closely together, have made great progress towards this goal. We are now considering a cross-subsidy mechanism that would ensure high risk households can get affordable insurance without extra costs being placed on policy holders or taxpayers.

“The best and most sustainable way of keeping insurance affordable in the long-term is to help prevent flooding in the first place. We are spending more than £2.1 billion on flood risk management, and are on course to exceed our goal to better protect 145,000 homes by March 2015.”

The work between the Government and insurance companies is taking place against a backdrop of significant advances in flood risk mapping and forecasting which in turn is giving insurers the ability to predict the level of flood risk to individual properties.

The Government is also working with local authorities and other partners to look at how communities, through working together, can help to manage the costs of flood insurance.