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Government and ABI to extend Flood Insurance Deal

The Issue

The ABI and the government are in emergency talks about how to extend their current flood insurance deal, as potential replacement Flood Re will not be ready in time when it ends in June.

The trade body has been locked in negotiations with the Treasury and the Department for Environment, Food and Rural Affairs (Defra) for months to replace the Statement of Principles on flood insurance, which expires on 30 June. Numerous properties could be left without affordable flood insurance if a new deal is not negotiated or the statement extended.

Neither the ABI nor the government wants to renew the statement, which was meant to be a stopgap when it was agreed in 2000.

Under the statement, insurers provide flood cover to homes and businesses in high-risk areas on the condition that the government invests in flood defences.

The Solution

A source close to the talks said the two parties want to extend the Statement of Principles by a month at first, and then at three-month intervals, subject to progress being made towards implementing Flood Re.

Discussions that ABI are having with the government are at a crucial and intensive stage. ABI want to reach an agreement, and if they do, a transitional agreement will need to be in place.

Flood Re is the ABI’s replacement for the statement. Flood Re would be a pool of properties at risk of flooding. There would be an agreed entry premium for the pool, and the insurers involved could submit risks to Flood Re or write them cheaper themselves. The scheme could be funded by a government levy.

We need a solution that ensures the availability and affordability of flood insurance for those at flood risk but does not place unsustainable costs on wider policyholders and the taxpayer.

A range of options are on the table and no final decisions have yet been taken.

ABI members have agreed to continue to meet their commitments to offering flood insurance under the existing industry agreement (Flood Insurance Statement of Principles) for one extra month after it expires on June 30 while complex issues are resolved.

What to do next

If you’d like any further information on your property or how we can help you reduce risks call us now and speak to one of our specialists.

Call 01789 761670

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