Project Noah: perfect solution or government cop-out?

Project Noah – what’s the big idea?

Insurers would be invited to place the flood elements of their household books into a central pool. The pool will then go to the reinsurance market to secure cover.

Who would be involved?

The initiative’s backers, Marsh and Guy Carpenter, say the scheme relies on attracting a “critical mass” of insurers to participate in the pool, which they claim to have achieved. They also say reinsurers are interested in the potential fresh opportunities that the project throws up.

What problem does it seek to tackle?

The ABI’s statement of principles agreement, under which insurers commit to continue offering flood insurance as part of standard household and business packages, runs out in July 2013. This will start to affect renewals from the middle of next year onwards.  

What’s the government doing about the issue?

Flood minister Richard Benyon has told parliament that the government will be publishing a statement before Christmas on its post-statement of principles position, with a final decision due in the spring of next year. The Treasury and the Department for Environment, Food and Rural Affairs – the two Whitehall ministries with the biggest say in flooding policy – have received the report from its flood working group, outlining post-statement of principles options.

What’s the problem with the government’s approach?

Given that spring officially ends on 22 June, just over a week before the last year of the statement of principles commences, the government’s timetable exposes the insurance industry and its policyholders to considerable uncertainty.

So how would Project Noah help?

It could help by mobilising the reinsurance market to spread the risks involved in insuring flood-risk areas. At the moment, insurers effectively cross-subsidise such customers themselves.

The government has expressed interest in Project Noah – why?

Given the fiscal hole that the government is in, a purely private sector pooling solution like Project Noah is highly attractive – it means fewer liabilities on the public sector books. The initiative also fits with the government’s broader ideological ‘Big Society’ drive to offload government responsibilities onto the private and voluntary sectors.