SMEs, private landlords, new homes, and leasehold properties won’t be covered by scheme

Biba wants brokers to provide it with evidence of how difficult it will be to find affordable flood insurance for properties excluded from Flood Re.

The trade body has long argued that the exclusion will make it harder for its members to find affordable flood insurance for companies with up to 10 staff, including home-based micro enterprises.

The fact-finding mission, set to start in March, is in response to the government’s demand for evidence from small business groups to support their claim that SMEs will be unable to get affordable insurance.

Biba will ask brokers if it is becoming increasingly difficult for them to place risks for affected businesses, what customers can do to mitigate flood risk and the impact on SMEs if they are unable to access affordable insurance.

Pressure on government

The survey is geared around measuring the scale and impact of Flood Re exclusions on consumers.

The trade association wants to gather a body of evidence that it hopes will put pressure on the government to end the exclusion or come up with an alternative solution.

Biba executive director Graeme Trudgill told Insurance Times: “With those properties that are excluded we want to know: are they worried, are there any issues and, what do they think is the right solution going forward?

“They [the government] said they were not going to anything in those areas but if any evidence was brought to them they would.

“We think it’s our place to see if there’s any evidence or any concerns, then we’ll all be in a clearer place as to what should be done.”

Amendment to Water Bill

Flood Re will also exclude residential private landlords, housing association homes, houses built after January 2009, council homes and properties in council tax band H.

The call for evidence comes after an amendment to the Water Bill was tabled by Lord Lytton to include leasehold and privately rented properties.

The proposals will be examined in detail as the bill moves to the report stage for consideration. A date has not yet been set for the report stage.

The government has said it would be inappropriate for a consumer levy to subsidise commercial organisations.

At the Downing Street meeting last week insurers said they would continue to provide insurance to SMEs on a competitive basis, and that the small number of leaseholders in high risk areas not be covered by Flood Re would still be able to access affordable insurance commercially.

Biba to share consultation questions

Biba plans to share its questions with other trade associations, including the British Property Federation (BPF) to ask their members.

BPF says data from the Leasehold Knowledge Partnership estimates that there are at least 800,000 leasehold properties in England that are in flood risk areas, with 70,000 of those at high risk.

An alliance of trade associations, including BPF and the Council of Mortgage Lenders (CML) has previously claimed that millions of properties are likely to be excluded, including five million leasehold properties and four million homes let out by private landlords, rather than the industry-cited estimate of 9,000 homes.

Two-tier system?

BPF director of policy Ian Fletcher said: “Flood Re is about guaranteeing flood cover affordability to householders and that should include all of them.

“Flat owners are householders and should get the same guarantee as those who own houses. Instead we are creating a two-tier system, where people who live in houses get a guarantee, and those in flats don’t.”

Trudgill added: “These other organisations are really worried. Their members are currently protected by the terms of the old agreements and they are no longer going to be.

“This is what is going to make it really difficult to get evidence because the comfort blanket is still there.

“It is only when it is gone that we will be able to see the full concern.”

The consultation with brokers is expected to last for around a month.

Flood Re is expected to become operational in June 2015.