New working party to develop products for at-risk areas after 2013
Brokers are positioning themselves for the end of the government-industry agreement to offer insurance for high flood-risk zones. Biba is spearheading the search for market solutions to maintain cover in such areas by developing niche products.
The association has decided to set up a think tank of brokers and underwriters to develop bespoke products for properties in areas covered by the ‘statement of principles’ agreement, under which the industry is offering flood cover as part of standard property products until 2013.
Biba’s move has been triggered by last November’s comprehensive spending review, in which the government cut flood protection investment by 25% to £2.1bn over the next four years.
The working group will draw its membership from Biba’s property committee, brokers specialising in flood cover and insurer representatives.
Biba head of corporate affairs Graeme Trudgill said: “The situation is only going to get worse and we need to be better prepared to deal with it. We can’t stick our heads in the sand. We have to make sure that there are products out there.”
Trudgill said that it was increasingly likely that an open market solution would be the government’s preferred option rather than a pooled fund or regulation requiring insurers to provide cover in high flood-risk areas – the two other options on the table. “If the market can sort out this situation itself, that’s a better option than costly regulation. We accept that the ABI has said that the statement of principles is not going to continue. We are looking for our members to be part of a solution. They are entrepreneurial and keen to get involved.”
The brokers’ association held a meeting with the ABI last week at which the two bodies discussed the group’s establishment.
JLT European real estate partner Bill Gloyn said: “Any solution for people who would otherwise be left uninsured is going to be very important.”
“However, there are wider issues at stake,” he added, pointing out that specialised products could not fully compensate for the failure to provide adequate flood defences in at-risk areas.