The ABI’s Statement of Principles sets out the basic approach for member companies providing flood insurance. Its aim is to ensure that there is a competitive market for insurance based on the actual risk of flooding.

The new approach will apply from 1 January 2003 and will replace the current temporary agreement that was created by the industry following the floods of autumn 2000.

1. General policy
ABI members will continue to continue to provide flood insurance for as many domestic properties and small businesses as possible. The premiums charged and other terms, such as excesses, will reflect the risk of flooding and will be offered in a competitive market.

2. Operation of the Principles
Areas currently defended to government standards are:

  • Three quarters of the

2 million homes and businesses situated in flood plains are protected against flooding at or above the government’s minimum standards. For these properties, flood cover will be available as a standard policy feature, although premiums will vary according to the degree of risk.

  • High risk areas where improved defences are planned by 2007

Where the government’s minimum standards are not met, but where improvements in flood defences sufficient to meet these standards are scheduled for completion by 2007, insurers will maintain flood cover for properties that they already insure.

Insurers will also make special efforts to maintain cover for properties when they are sold, subject to satisfactory information about the new owners and proposed use of premises.

For high risk areas where no improvements in defences are planned, insurers cannot guarantee to maintain cover.

Insurers will, however, “examine the risks on a case-by-case basis”.

They will “use their best efforts” to provide cover and will work with the policyholder and government bodies to see what action could be taken to offer some form of insurance.

Government action

Implementation of these principles depends on government action.

  • Actual spending on flood defences to meet or exceed that set out in the 2002 spending review
  • Implementation of the improvements in the system of flood defence planning set out in Defra’s consultation paper lThe Environment Agency’s flood database to be available to insurers by beginning of 2003
  • Early improvements on the flood warning system and implementation of the Cabinet Office’s recent emergency planning review.