Government to consult on new flood insurance proposals

The Department for Environment, Food and Rural Affairs (Defra) has published proposals for the future regulation of the flood insurance industry and is seeking the views of those affected through a consultation exercise.

The proposals concentrate on the mechanisms by which those living in the most flood-prone areas are given the opportunity to access affordable flood insurance. At the moment such arrangements are governed by a voluntary agreement between the insurance industry and the Government known as the Statement of Principles.

Under the new proposals, the Statement of Principles will be replaced with a new voluntary agreement between industry and government and a system called Flood Re. Flood Re will introduce a price cap on how much households can be charged for flood insurance. Around 500,000 highest-risk propertise would have their insurance premiums capped.

The estimated cost to the insurance industry of this would be £180m per year, and this would be covered by a levy on all household insurance providers, effectively meaning that the cost of high-risk flood insurance would be spread between all households in the country.

The Government is also seeking to introduce regulatory powers in the forthcoming Water Bill to back the voluntary agreement up with statutory force.

Full details of the proposals, and how to make your views known, can be found on the Defra website. The consultation runs until the 8th August.