Commission’s approval needed under state aid rules

Floods flooding in Yorkshire

The government is going to Brussels to seek approval for the Flood Re plan.

The Department for Agriculture, Food and Rural Affairs (Defra) will ask the European Commission for permission to make state aid available to the insurance industry under Flood Re on the grounds the scheme is necessary for community safety.

Under EU rules, governments are not allowed to give extra financial support to one industry over others without justification.

Defra head of flood Dan Osgood told delegates at yesterday’s ABI conference said: “We will go to Brussels and make the case. There are a range of other examples such as terror insurance in Denmark.

“We will look at all of those and make the best possible case.”

Flood Re was backed with government capital spending on flood defences of £370m for 2015-16 and a further six year settlement up to 2021 of more than £2.3bn.

“Ministers are pleased that an agreement has been reached,” Osgood said. “It provides certainty to people. The price that they will need to pay for flood cover is not going to be above a certain level. And ministers welcome the targeting of help to the households that need it the most.”

The government would amend the Water Bill that is currently before parliament to include Flood Re in the autumn and the legislation was expected to be passed by the end of the session, with the measures going  live within two years.

The public consultation on Flood Re, which is due to end on August 6, was also seeking views on a fall-back option involving regulation requiring insurers to provide affordable flood insurance for high-risk households, he added.