Flood deal should include “those that need it most”, says trade body

Floods flooding in Yorkshire

Small businesses and “genuinely uninsurable” properties should be included in the proposed Flood Re agreement, Biba has said.

The brokers’ association has raised concerns over a lack of cover in the proposals for small businesses and some UK householders in its response to the government’s consultation on Flood Re, which ended on Thursday.

Biba said small businesses, particularly mixed-use properties such as bed-and-breakfast establishments, should be included in Flood Re, noting that they were covered by the Statement of Principles, which the proposed new flood deal will replace.

The association’s submission comes after the British Property Federation (BPF) warned that thousands of small-to-medium-sized enterprises could be left without affordable flood cover because they were excluded from Flood Re.

The BPF maintained that excluding SMEs, which formed the “backbone of the UK economy”, from the proposals could lead to large hikes in their insurance premiums and even to some premises becoming uninsurable.

Biba has raised questions as to what the definition of a “genuinely uninsurable” property would include and who would devise it and has pointed to major omissions in the plan that needed to be resolved.

“Biba members who specialise in flood can cover about 99% of properties in flood risk areas, so Biba strongly believes that the flood solution should be there for all UK postcode rated properties in the UK,” it said in a statement.

“Under the funding arrangements, there is a £100m gap when the Flood Re pool finishes and the re-insurance begins. Biba believes that this will need to be resolved before Flood Re can work.

“The £2.5bn limit of the re-insurance could also be breached if there is a super flood, for example on the east coast. There is no indication as to who will pick up the bill if this happens.”

Biba pointed out that previous attempts by other countries to obtain European Commission approval for flood plans – required for Flood Re because it is classed as “state aid” – had met with opposition.

Meanwhile, a proposal put forward by the government as an alternative to Flood Re, under which it would be able to oblige insurers to provide cover to properties at risk of flooding, could “cause issues”, the association said.

Such a measure could result in the government seeking to reduce its level of flood defence spending, which in turn could give insurers a reason to withdraw from the market.

Biba chief executive Steve White said: “Biba has been working with the insurance industry and government to facilitate a solution that ensures flood insurance cover is available to those that need it most.

“While we believe that the proposed model can work, we believe that excluding small businesses – which employ about 14 million people – would be a mistake, as this could make finding affordable cover difficult.”

Furthermore, excluding “genuinely uninsurable properties” from Flood Re, would bar access to cover from those that need it most and could leave them “high and dry”. This would defeat the point of the agreement.         

Biba executive director Graeme Trudgill said: “Flood Re will need primary legislation and during the interim period, Biba has recommended that a system of signposting is formally created in order to help people more easily access insurance for their flood risk property.”

Biba was ready to assist the government and the industry on such an agreement in the way it had done for a signposting agreement designed to promote access to travel and motor insurance for older people, he added.