ABI dubs draft financial management rules ‘unworkable’
The Department for Environment, Food and Rural Affairs (Defra) has begun consulting the industry on legislation that will determine the scope of Flood Re.
But the ABI has already dubbed the draft financial management rules “unworkable”.
The legislation enabling the creation of Flood Re is already in place. It is part of the Water Act 2014, which gained royal assent on 14 May.
But secondary legislation is required to govern the funding, operation and scope of the scheme, including which properties can access it.
The insurance industry has until 16 September to give its views on the proposed legislation.
The ABI said issues with the draft financial management rules need to be fixed during the consultation process.
ABI deputy director general Huw Evans said: “Despite the fact that in discussions we have made some progress, the current draft rules on the financial management of Flood Re are not agreed with the industry and would be unworkable if passed into law in the current state.
“It is critical that these issues are fixed during the consultation phase in the coming months if we are to deliver a privately run but publicly accountable Flood Re that can work smoothly for the benefit of customers in high -risk flood areas and succeed in gaining regulatory authorisation as a sustainable insurance vehicle.”
Flood Re is due to start operating in summer 2015. It aims to ensure that homes at high risk of flooding can continue to get affordable flood insurance.
The scheme will be funded by a levy of 2.2% of premium on all home insurance policies in the UK.