Emergency talks buy more time to set up a solution
The ABI and the government are in emergency talks about how to extend their current flood insurance deal, as potential replacement Flood Re will not be ready in time when it ends in June.
The trade body has been locked in negotiations with the Treasury and the Department for Environment, Food and Rural Affairs (Defra) for months to replace the Statement of Principles on flood insurance, which expires on 30 June. Numerous properties could be left without affordable flood insurance if a new deal is not negotiated or the statement extended.
Neither the ABI nor the government want to renew the statement, which was meant to be a stopgap when it was agreed in 2000.
A source close to the talks said the two parties want to extend the Statement of Principles by a month at first, and then at three-month intervals, subject to progress being made towards implementing Flood Re.
“It looks like the government does want something to happen,” he said.
Under the statement, insurers provide flood cover to homes and businesses in high-risk areas on the condition that the government invests in flood defences.
An ABI spokesman would not comment on the details of the extension plans, but said: “The discussions we are having with the government are at a crucial and intensive stage. We want to reach an agreement, and if we do, a transitional agreement will need to be in place.”
Marsh has its own flood insurance scheme, Project Noah, which was once positioned as a rival to Flood Re.
Insurance Times understands that Marsh is continuing to develop Project Noah, but that it is likely to complement Flood Re by reinsuring books of flood risks.
Flood Re is the ABI’s replacement for the statement. Flood Re would be a pool of properties at risk of flooding. There would be an agreed entry premium for the pool, and the insurers involved could submit risks to Flood Re or write them cheaper themselves. The scheme could be funded by a government levy.
Yesterday Defra parliamentary under secretary of state Richard Benyon told Parliament that “constructive discussions continue between government and the ABI and others about the future of flood insurance” but declined to go into detail.
“We need a solution that ensures the availability and affordability of flood insurance for those at flood risk but does not place unsustainable costs on wider policyholders and the taxpayer. A range of options are on the table and no final decisions have been taken.”
A Defra spokesperson said: “The government is having constructive talks with the ABI and is meeting with them regularly. We want to get an agreement on insurance that provides a lasting solution and secures affordability and availability of flood insurance for policy holders.”
A Treasury spokesmen was unavailable to comment. A Marsh spokesman declined to comment.
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