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BWBLOG: Iqbal Rassool: Insuring those most at risk from flooding

26 March 2014

The way residential properties at high risk of flooding are insured in the UK, is set to change. The Statement of Principles (an agreement between the UK Government and the Association of British Insurers) was due to expire on 31st July 2013; deemed no longer fit for purpose in a changing climate where flood events are increasing in both frequency and magnitude.

The government and ABI have been in locked in negotiations, to ensure that those at highest risk will still be able to afford to purchase flood insurance. In an agreement announced last year those at greatest risk will be re-insured by a new company - ‘Flood-Re’ - funds for which will come from both those properties most at risk and a small levy on all house hold building insurance policies. This  new company will be setup through the legislation currently being debated in Parliament as part of the Water Bill, which is due to be enacted in the summer of 2015, the details of which are still subject to change during the debates. It is currently proposed that those eligible to be included in the Flood-Re scheme will have their insurance premiums and excesses capped, depending upon their council tax band, ensuring long term sustainability and affordability of insurance.

However, it is the details which are the major talking points.

The current proposals being debated are that if your property was built after 2009 or falls into council tax Band H, you will not eligible to covered by Flood-Re. You will therefore be at the mercy of the open market and you could face unlimited flood insurance costs or be refused cover altogether. This is likely to cause problems to local authorities with a significant portion of their catchment at high risk of flooding; who will still obliged by the planning system to identify a five-year supply of housing land.

There is significant discussion within the media about how the various exclusions are going to affect people. However, there is one question, which as far as I can see is yet to be answered. How Flood-Re affects those who have homes built post 2009; but have taken steps to reduce their risk from flooding? Those developments built on marginal areas of floodplain, but which have been given finished floor levels 600mm above the 1 in 100 year + climate change flood level, or residential dwellings which have been fitted with flood resilience or resistance measures. Will these properties be removed from the zone of ‘high risk’ and therefore be at the whim of the open market? Where will burden of proof lie regarding their risk - with the homeowner able to provide circumstantial evidence, or the will emphasis be placed upon the results of broad scale hydraulic modelling results from the Environment Agency and Insurance Companies take precedence?

So although Flood-Re will go a long way to ensure the sustainability and affordability of flood insurance to those most at risk, so far there are still some significant questions which need to be answered.