Stephen Haddrill, director general of the ABI says the agreement is good news for all.
Last week’s announcement that the ABI had reached agreement with the government on flooding and insurance was good news for everyone at risk of flooding. It marks the start of a long-term strategic approach to managing flooding which will ensure that flood insurance remains widely available now and in the long term.
We have not, of course, reached this position overnight. Last summer’s devastating floods focused everyone’s minds on what is at stake. The ABI’s analysis of the wettest summer on record, followed by Sir Michael Pitt’s report on lessons learnt, highlighted the shortcomings of how flood risk is managed. These shortcomings not only leave many more vulnerable, but increasingly threaten the continued availability of flood insurance. The case for an overhaul in flood management has, in recent months, become irrefutable.
The key achievement of this agreement is the commitment from government that it will put in place a long-term investment strategy to reduce flood risk. This is hugely significant. It marks a move away from the current short term approach characterised by allocating spending to a problem without knowing the full extent of the risk.
Encouragingly, the government has said that they intend to give The Environment Agency overall responsibility in the Floods and Water Bill for overseeing new powers and responsibilities for local authorities to draw up and implement plans to assess and reduce surface water flooding.
The agreement also reinforces the partnership between the industry and government to encourage homeowners and businesses to take flood resistance measures. We will continue working closely with government to promote take up of insurance among low-income households.
So what does this mean for the flood insurance market? The Statement of Principles on Flood Insurance commits insurers to continue to offer flood cover under certain scenarios. However it distorts the market and favours new insurers over existing ones. And it undermines incentives for homeowners to take steps to improve the flood resistance and resilience of their properties.
Implementing the package of measures over the next five years should ensure that flood insurance continues to be widely available, without the need for the Statement of Principles, which will end in 2013. In the next five years, we will be closely monitoring progress towards implementing the measures we have agreed. While the Statement will continue until then, it will not apply to any new property built after 1 January 2009. This will encourage developers and customers purchasing a property in a new development to ensure that it is insurable against flooding.
This is where the hard work begins. We will be monitoring the government’s progress in delivering on the commitment it has made. Getting it right should ensure that in five years’ time not only is the flood risk well managed and adequately funded, but that we have a thriving and innovative flood insurance market.