DEFRA and ABI reach deal on flood insurance

Tortuous negotiations between insurers and the Government have led to a deal on flood insurance just weeks before the existing agreement between the Department for the Environment, Food and Rural Affairs and the Association of British Insurers is due to expire at the end of this month.

Talks on a replacement had stretched over months raising fears that no agreement could be reached. The new deal will allow residents of homes in flood-prone areas to be guaranteed affordable flooding insurance. Insurance premiums will now be capped linked to council tax bands.

All UK household insurers will have to pay a levy to create a funding pool to pay for the discounted insurance on properties where resident would otherwise struggle to find cover. The fund will be named Flood Re.

The proposals will be given legal backing through the Water Bill, and last for at least the next 20 years. Until the Water Bill becomes law the existing Statement of Principles on flood insurance will continue in force after the end of this month.

Environment secretary Owen Paterson said: “We have worked extremely hard with the industry to reach an agreement on the future of flood insurance.
“People no longer need to live in fear of being uninsurable and that those at most risk can get protection, now and in the future.”

Otto Thoresen, the ABI’s director general, said: “Insurers’ priority has always been to ensure that flood insurance remains affordable and available for everyone who needs it.”

A joint statement by Defra and the ABI said “getting to this stage has required compromise by both sides and there remain issues that need to be overcome”.