ABI calls for action on flood insurance

| January 31, 2012
ABI calls for action on flood insurance

The Association of British Insurers has warned that time is running out to ensure that UK home owners in areas at risk of flooding can afford to insure their properties in the future.

A voluntary flood agreement between the government and the insurance industry expires in June 2013.

Under the current agreement, which started in 2000, insurers are required to provide flood cover as standard for properties built before 1 January 2009, where the risk of flooding is low.

They must also allow households in higher risk areas to automatically renew their cover with the same insurer, as long as there are plans in place to build flood defences within five years.

Unless this agreement is extended around 200,000 homes at risk from flooding may find it difficult to insure their properties.

Households in Boston and Skegness, and the Vale of Clwyd face the greatest risks, according to research carried out by the Association of British Insurers (ABI).

ABI’s director-general Otto Thoresen said: “”We are frustrated with the progress of our talks with the Government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced.

“No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover.”

Government agencies are unable to agree over who is responsible for flood defences, with the Department for Environment, Food and Rural Affairs (Defra) claiming that it shares the responsibility with the Environment Agency and local bodies.

However no structure is in place to alert Defra when local flood management is adequate and it needs to take action.

Environment Secretary Caroline Spelman said: “We want flood insurance to remain widely available and as part of these discussions, over the next few months we are looking at feasible, value for money ways of targeting funding support to those most in need.”

The Environment Department has published a report suggesting that flooding is the worst climate change threat facing the UK.

Up to 3.6 million people in the UK are at risk by the middle of the century and the cost of damage caused by flooding could increase to between £2 billion and £10 billion a year by 2080.

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