Insurers pledge to provide insurance to homes at significant risk of flooding to end in 2013 as ministers consider long term investment.
The insurance industry’s pledge to provide insurance to homes at significant risk of flooding will end in 2013 under a landmark deal with the government.
Under a deal hammered out with the ABI, the government will commit to developing a long-term investment strategy for flood prevention.
The government has also agreed to tighten up the planning laws to prevent inappropriate development in flood risk areas. Essential developments in flood-prone areas would be flood resilient.
In return, insurers have agreed to provide flood cover to certain high-risk properties, under the so-called Statement of Principles, for a further five years.
The new agreement will not cover properties built after 1 January 2009.
Both parties said the agreement would ensure that flood insurance would remain widely available now and in the longer term.
The ABI said the deal would enable a competitive insurance market for flood cover to develop, without the need for the Statement of Principles.
Alan Gairns, property insurance manager at RSA, who was involved in the negotiations, said the deal was a good one for the insurance industry.
But there was no immediate commitment from the government of any more money to improve flood defences.
The ABI had demanded an increase in flood spending to £1bn by 2010-2011, threatening to tear up
the Statement of Principles if this was not met.
But the current level of spending of £800 by 2010-2011, promised by the government in last year’s Comprehensive Spending Review, will remain.
The government has committed to examine future funding requirements as part of the long-term flood prevention strategy. It will publish a strategy document, showing a range of policy options and funding implications, in spring 2009.
The agreement will also see the government look at the management of surface water flooding, a major cause of last summer’s floods.
Insurers will be able to scrap the agreement if they are not happy with the progress made by the government. Gairns said that deal was not binding. “It is subject to annual review and we will look for progress. If there was some cause for concern, insurers could pull out [before 2013].”
Last month, Sir Michael Pitt published his review of the lessons learned from last summer’s floods, which cost insurers £3bn.
The Pitt Review called for the insurance industry to work with government to deliver a public education programme setting out the benefits of flood insurance.
The report also recommended that in flood risk areas, insurance documents should include information on flood risk and the steps that can be taken to mitigate risk.