High risk households will get affordable flood insurance under a new scheme agreed between the Association of British Insurers (ABI) and government, it has been announced.
Premiums will be subsidised by an industry-wide levy on house insurance. Public spending on flood defences will be boosted over a five year period, from 2015 to 2020.
Flood-risk properties covered
The agreement provides continuity in flood insurance cover for an estimated 200,000 high risk properties.
An existing agreement, under which insurers took on at-risk homes while the government improved national flood defences, was due to expire at the end of the month.
The new deal will see firms continue to insure all but small section of properties, cross-subsidising the high cost of this with an industry-wide levy. This is estimated to add £10.50 per year to all home insurance policies. Money raised by the subsidy will be paid into a not-for-profit scheme called Flood Re.
Announcing the deal with the government,Otto Thoresen, director general at the ABI, said: ‘Insurers’ priority has always been to ensure that flood insurance remains affordable and available for everyone who needs it. Today’s announcement is the start of a process that aims to deliver affordable flood insurance to high flood risk households.’
Flood insurance premiums capped
To keep insurance affordable for at-risk owners, their premiums will be capped according to their council tax band.
Bands A and B will have premiums capped at £210 a year. The limit will rise on a sliding scale, up to properties in band G, where the cap will be £540. Owners of the most expensive properties, in band H, will not have their premiums capped, and properties built after 2009 will also fall outside the capped premium scheme.
Flood defences – government spending plans
The government is to spend £344m on flood defences and prevention schemes in 2015. This is due to rise to £370m in 2016 and rise in line with inflation each year until 2020.
Commenting on the proposed establishment of Flood Re, the Environment Secretary, Owen Paterson said: ‘Flooding is terrible for anyone affected by it. We have worked extremely hard with the industry to reach an agreement on the future of flood insurance.
‘There are still areas to work through but this announcement means that 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.’
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