The Association of British Insurers has described flooding as the biggest climate change risk now facing the UK.
Nick Starling, Director of General Insurance at the ABI, was speaking on the Radio 4’s Today programme this morning in a discussion over the current stalemate between the insurance industry and the Government over the provision of flood insurance for high-risk households.
The ABI has called for the Government to commit to a joint solution to ensure long term affordable flood insurance for high-risk households, describing the current state of talks aimed at reaching an agreement as being at an impasse.
According to the ABI, the Government has refused to consider providing a temporary overdraft facility to a proposed not-for-profit special insurance fund for 200,000 high-risk households which will otherwise struggle to get affordable household insurance when the current arrangements come to an end next year.
It costs an average £30,000 to renovate and repair each individual property following flood damage.
In a statement issued earlier today, Nick Starling said,
"The Government has indicated it will not provide any temporary overdraft facility for the insurance industry's not for profit scheme, which makes it very difficult for it to go ahead. As a result, negotiations have hit an impasse. Insurers know their customers are increasingly worried about flood cover and we will therefore continue talks with Government to try and find a way forward.
"The severe floods experienced by many areas of the UK this year are a reminder of the rising flood risk facing the UK. It is therefore vital that insurers and Government tackle this issue together - this is not just a problem for insurers. No country in the world has a free market for flood insurance with high levels of affordable cover without some form of Government involvement."
The existing Statement of Principles covering flood insurance, established in 2000 as a temporary measure, is due to expire on 30 June 2013. There is acceptance from insurers and the Government that these principles are now outdated and cannot continue in their existing form as general understanding of flood risk has improved significantly since then.
The 200,000 properties covered by the proposed scheme represents 1-2 per cent of all properties in the UK. The temporary overdraft facility would be used to pay claims if there were 2007-style floods in the early years of the scheme before it had built up its reserves.
The number of properties now facing generally increased flood risk is an estimated 5.2 million homes.
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