Insurers say increased demand for flood cover has not materialised despite government pressure

Local authorities’ demand for flood insurance cover has increased little despite pressure from the government for authorities to review their insurance arrangements.

The Department for Communities and Local Government recently wrote to all local authority chief executives urging them to review their insurance cover.

The letter told local authorities to examine their flood cover irrespective of whether they had been affected by last summer’s floods.

“The Ministerial Group are keen that you ensure you are satisfied with the arrangements and level of cover in place in your local authority,” it said.

But public authorities’ insurer Zurich Municipal said demand for flood cover had increased little following the letter.

Larry Stokes, underwriting manager at Zurich Municipal, said: “We had expected a deluge of inquiries, but it didn’t produce as many [as expected].”

Stokes said most local authorities had made decisions about their flood insurance programmes before the summer floods, which cost insurers over £3bn.

Local authorities spend approximately £700m a year on insurance, with half of that being property cover.

Insurance programmes typically include a mixture of self-insurance and insurance purchased on the commercial market. Local authorities have a duty to ensure that they have a sound system of internal control, which includes arrangements for the management of risk.

Guidance on local authority reserves and balances lists “the adequacy of the authority’s insurance arrangements to cover major unforeseen risks” as one of the factors authorities should consider in deciding the level of their general reserves.

The Audit Commission has recently proposed a study into the financial impact of the June and July flooding on public bodies.

Sir Michael Pitt is currently undertaking a national review into the lessons learned from the flooding.