"Government should invest in flood defences" - AA chief

AA Insurance director Simon Douglas has called on the government to make further commitments to invest in flood defences and extend the statement of principles.

The AA chief spoke out ahead of chancellor George Osborne’s spending review announcement tomorrow and the expiry of the original statement of principles on 30 June. The statement has already been extended as talks continue between the ABI and the government.

“Insurers are taking a cautious view of progress of the government discussions and believe that the statement of principles may need to be extended further – possibly by up to six months,” Douglas said.

“But even if a solution is reached tomorrow, there will need to be a transitional period while legislation is put in place, all of which takes time.

Douglas said that a privately-led insurance solution to build a flood reserve to meet future major claims was probably the best way forward.

“But I do believe the government will need to underwrite the final outcome to a certain extent, at least during the early years,” he said.

Hundreds of thousands of flood-risk affected homes could be left uninsured, if the government and insurers cannot reach an agreement.