Flooding: MPs deny claims householders face levy hike

MPs have dismissed claims that the replacement for the Statement of Principles on flood insurance will include higher home premiums.

Under the Statement of Principles, insurers agree to provide affordable flood insurance for homes and businesses if government reduces the risk by building flood defences.

The agreement expires next June, and the Treasury, ABI, Marsh and Department for the Environment, Food and Rural Affairs (Defra) are working on a replacement.

This week Defra secretary of state Caroline Spelman announced that the talks had made “significant progress” and that the government was considering formalising the present levy on homeowners that subsidises property premiums in flood-prone areas.

This led to reports that homeowners could end up paying more for their property premiums, but Spelman has moved to quash that. She said that no plans for a levy had been agreed, and that there would be no extra cost to consumers.

All-Party Parliamentary Group on Insurance and Financial Services chair Jonathan Evans MP said: “The concept being peddled in some corners that there should be a 10% additional levy on all property owners has no prospect of being put into effect, in my view.

“Already, homeowners have seen insurance costs rise 12% last year and 7% the year before. The idea that there could be some additional 10% levy in my book is a non-starter.”

Marsh and the ABI have both tabled proposals to replace the Statement of Principles (see timeline).

No decision has been reached, despite Defra promising to announce the basic outline of the replacement by the end of spring this year.

However, Insurance Times understands one area discussed recently is how to meet the cost of extreme flooding, likely to be based on the ABI’s Flood Re.

Aviva is the largest listed general insurer with the biggest exposure to the UK floods this year, facing claims of £20m-£40m for the first half of 2012, says Panmure Gordon analyst Barrie Cornes.