Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a657208
Politicians warned over flooding risk to homes
The insurance trade body has called for politicians to tackle the threat of flooding before some homes become uninsurable.
by Michelle McGagh on Feb 07, 2013 at 14:27
Insurers will today warn politicians that cross-party support is needed to help safeguard people’s homes from the growing risk of flooding.
The government and the insurance industry have been at loggerheads over how to insure homes that are susceptible to flooding.
In 2000 following flooding that caused £1 billion of damage the government and the Association of British Insurers (ABI) signed an agreement that said insurers would continue to insure properties at high risk of flooding if the government continued to invest in flood defences.
The pact lasts until June and now there is a stalemate over how the situation should be handled after this date. Over the past couple of years spending on flood defences has been cut and there is no new solution. The government wants insurers to foot the bill for insuring risky properties but they argue that there is no insurance market in the world that works without government support when it comes to flooding.
Nick Starling, ABI director of general insurance, will today push for cross-party political support to tackle the threat of flooding at a summit organised by the Labour Party.
Starling will say: ‘Flooding is the greatest natural threat facing the UK and the risk is rising so political consensus on how we effectively adapt to it is essential.
‘Insurers know the traumatic and devastating impact of flooding, through helping their customers recover after a flood. Political commitment in the key areas of investment in flood defences, sensible planning decisions and working in partnership with the insurance industry will ensure that flood risk communities get the protection and reassurance they need.’
Last year was the wettest on record in England and only just missed being the wettest ever year across the UK. The scale of the flooding problem is increasing and four out of the five wettest years on record have been since 2000.
The ABI is calling for the government to act in three ways:
- Create a rigorous planning system that prevents property developments in high flood areas. According to a House of Commons committee on climate change, over the past decade floodplain building has increased by 12% compared to 7% in the rest of England.
- To ensure that flood defence spending is sustained and long-term and keeps pace with the threat targeted to those areas of greatest need. The Environment Agency has already estimated that an additional £20 million a year is needed between 2011 and 2035 to maintain flood defence at their current levels.
- To recognise that flood insurance can only continue to remain affordable and available with government support, as happens in other countries.
The ABI has put forward a solution that it believes can work but it requires government support. It wants to establish an emergency fund for flooding cases, called Flood Re.
It would be funded by premiums paid on policies that cover high-risk homes plus the extra cost that is added to normal policies to subsidise riskier policies, which works out at about £8 per policy.
The ABI has said £200 million could be put into the fund each year and factoring in non-flood years, the fund could be built up to a sufficient size to deal with the next crisis.
The ABI is asking the government to provide a buffer, or overdraft, in case it has to pay out before sufficient funds are built up. This money would be paid back to the government.
However, the government has not agreed to the Flood Re deal and is cautious about placing any more burdens on taxpayers’ shoulders despite failing to find a resolution could mean that some homes become uninsurable.
More about this:
More from us
- Stalemate over flood insurance is bad news for homeowners
- How much should you sell your home for?
- 10 reasons food prices keep rising
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.
Latest from The Lolly
by Gavin Lumsden on May 22, 2013 at 11:42