UK floods: More than 200,000 households in high risk flood areas to become "uninsurable"

More than 200,000 households in high risk flood areas to become 'uninsurable' as funding talks between Government and industry failDeal allowing homes in high flood risk areas to be insured expires next yearInsurance firms want Government 'overdraft' to help fund claims during extreme flooding but have so far failed to reach an agreement
Association of British Insurers warns negotiations reached 'crisis point'

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UPDATED:

23:22 GMT, 26 November 2012

Two hundred thousand homes at high risk of flooding could be left without insurance cover because of a row between the Government and insurers.

More than 900 homes, mainly in the South West, have been deluged by flooding since last Wednesday in addition to around 3,000 homes flooded during heavy rains over the summer.

Ministers and the insurance industry have so far failed to reach an agreement over how to provide affordable cover to vulnerable homes, despite negotiating for two years.

Row: More than 200,000 homes at high risk of flooding could become uninsurable if the Government and the industry fail to strike a deal

Row: More than 200,000 homes at high risk of flooding could become uninsurable if the Government and the industry fail to strike a deal

Richard Benyon

Anger: Environment Minister Richard Benyon has accused the insurance industry of trying to take advantage of the situation in flood-hit Britain

Under a previous deal, most homes
which will never experience floods pay a ‘small sum’ on their insurance
premiums to subsidise cover for high-risk homes.

But this is due to
expire next year.

Insurers, who are furious that the Coalition has cut its flood budget by
400million despite nearly one in five homes being at risk, said the
Government had rejected their proposals for a new settlement.

Nick Starling, of the Association of British Insurers, warned that the
negotiations had reached ‘crisis point’.

He said: ‘We’ve had two years
to sort this out – during that time the insurance industry’s put a
massive amount of work and money into coming up with an insurance-led
solution, and we seem to have reached an impasse.

‘I should say first that our members are out there looking after people
who have been affected by these tragic floods, and that means we want a
solution even more now after the difficult events of the weekend.’

Insurers have put forward plans for a Flood Insurance Fund which would
be made up of levies on insurance premiums.

They have also asked for
more public cash to be injected into a temporary ‘overdraft’ to pay out
for claims during the current flooding crisis.

Claims average 20,000 to 40,000 per flooded home. They say this
overdraft would be paid back by the insurance industry next year when
the scheme has built up cash reserves.

Mr Starling said: ‘We’ve had floods all this year, and it’s quite clear
that what in the past was an exception is now becoming the norm.’

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Environment Secretary Owen Paterson, who visited flood-hit areas of
Devon yesterday, accused the industry of ‘opportunism’ for raising the
issue in public while the talks were still on-going.

He said there had
been ‘constructive and detailed discussions’ up until the end of last
week and that he was looking forward to looking at the latest proposals.

Ministers are worried about further hikes to premiums, which analysts
predict could rise by up to 10 per cent from 2014 under such a deal.

The Labour government and the insurance industry agreed a Statement of
Principles in 2000, which forces insurers to cover homes in flood-prone
areas, but it expires in June 2013.

Painful: A woman wades through flood water near Taunton at the weekend but a deal to make sure every home at flood risk is insured expires next June

Painful: A woman wades through flood water near Taunton at the weekend but a deal to make sure every home at flood risk is insured expires next June

High waters: Insurers have to pay-out around 3billion in claims during extreme flooding and want Government backing going forward

High waters: Insurers have to pay-out around 3billion in claims during extreme flooding and want Government backing going forward

If no new agreement is reached, households in flood-risk areas would be
left at the mercy of the market and around 200,000 homeowners would not
be able to secure or afford any insurance at all leaving them unable to
sell or re-mortgage their homes.

Mary Creagh, Labour’s environment spokesman, urged ministers to secure a
deal with insurers to provide universal flood cover.

She said: ‘If they
can’t sort this out it would be catastrophic for householders who could
be left with properties that they cannot insure, cannot mortgage and
cannot sell.