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April 7, 2014 8:12 pm
Pressure is mounting on government officials to backtrack on plans to exclude the most expensive properties from the new national flood subsidy fund after insurers withdrew their support for the exclusion.
The Association of British Insurers has written to Owen Paterson, environment secretary, to call for more properties to be protected under the Flood Re scheme.
Officials at the Department for Environment, Food & Rural Affairs said on Monday that the ABI’s intervention would not change their stance. They argue that if expensive riverside homes are included, poor households would effectively be subsidising the wealthy who chose to live on floodplains.
Yet with David Cameron, prime minister, also supporting a review of the policy, calls are growing for a rethink – even as the legislation to implement Flood Re nears conclusion in parliament.
Flood Re is being set up to cap the cost of insurance for hundreds of thousands of households.
However, properties in the Band H council tax band – along with buy-to-let and newbuild homes – face being excluded from the scheme, even though their residents would have pay a mandatory levy to fund it.
Without the protection of Flood Re, policyholders are at risk of huge increases in premiums, because insurers say their existing commitment to universal flood coverage is no longer viable.
The ABI had previously argued in favour of the Band H exclusion, pointing out that ending it would mean a rise in the Flood Re levy for everyone.
But the trade body has now reversed its position and is pushing for Band H homes to be included.
On Monday, the ABI said it had originally gone along with the exclusion because political objections to subsidising rich homeowners could have undermined the scheme.
Huw Evans, director of policy at the ABI, said the body was changing its position because it was now clear that Flood Re has cross-party support.
His letter to Mr Paterson argues that the winter storms showed flooding can “affect people regardless of their Council Tax band”. It acknowledges that policyholders in at-risk Band H properties “could face issues” with securing affordable cover.
Bronek Masojada, chief executive of the insurer Hiscox, has complained about a lack of clarity from ministers and the Association of British Insurers about the number of properties that will be excluded.
About 1,400 Band H houses are at “high risk of flooding”, according to the ABI. But according to Mr Masojada, other exclusions mean there could be as many as 350,000 houses in high risk areas that will not be granted protection under Flood Re.
In a letter to members of the House of Lords last month, he wrote: “When the next flood arrives we will see divisive scenes where those who are subsidising their neighbours but unable to access flood insurance themselves . . . will be understandably angry with those who implemented this flawed approach.”
Defra said in a statement: “Our aim is to target support to lower income households, as these are the people who are most likely to be struggling to afford flood insurance.”
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