Just as ‘delay’ has almost become a synonym for the slow pace of Solvency II, ‘vague’ is fast becoming the tag for the government’s lack of clarity over the replacement to the statement of principles on flood insurance.

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 Defra are working on a replacement. But the government has been reluctant to give any information about the progress of the project, despite numerous prods from the insurance industry, consumer groups and the press.

Defra offers few answers

Last week the Department for Environment, Food and Rural Affairs (Defra) fielded yet another question about the progress of the project. Yet again the department’s response gave little to go on.

Defra under-secretary of state Richard Benyon repeated the department’s earlier announcement that several plans were being considered, and that one is a levy that would reflect the current subsidy between property premiums in low and high flood risk areas.

The only new information in the announcement was that Defra’s priority is to “resolve detailed design issues” and that there will be updates “in due course”. Hardly a revelation, nor the much-needed reassurance that homeowners and insurers desperately want.

Decision needed urgently

Insurance Times understands that members of Defra and the Treasury have no plans to extend the current statement of principles and are well aware of the need for insurers and brokers to have enough time to prepare for next June.

It could be that the department is more prepared than it seems, but it has not done itself any favours by keeping quiet about the future of flood insurance.

Flooding is a very sensitive issue, and being vague makes the department look like it has a weak grasp on the issue, or worse, that it doesn’t care enough.

New faces, new challenges

To add to the problem, the department’s former boss, Caroline Spelman, has just been ousted in last week’s parliamentary reshuffle and been replaced by Owen Paterson, former secretary of state for Northern Ireland.

Having a new face at the top might have no impact on the progress of a replacement to the statement of principles, but it certainly cannot help.

Homeowners and the insurance industry need clarity, and Defra would be wise to start giving it.