The Association of British Insurers and the Government today struck a new deal to develop a not-for-profit scheme called Food Re to make sure flood insurance remains widely available and affordable.
"This is the start of a process that aims to deliver affordable flood insurance to high flood risk households," said Otto Thoresen, the ABI’s Director General. "Getting to this stage has required compromise by both sides and there remain issues that need to be overcome. But insurers and the Government are now working towards a shared vision."
Environment Secretary Owen Paterson said: "Flooding is terrible for anyone affected by it. We have worked extremely hard with the industry to reach an agreement on the future of flood insurance. There are still areas to work through but this announcement means that people no longer need to live in fear of being uninsurable and that those at most risk can get protection, now and in the future."
The new agreement will put a cap on flood insurance premiums and link them to council bands. Flood re will charge member firms an annual £180 million, representing a levy of £10.50 on annual household premiums.
The aim is that Flood Re will be up and running by summer 2015 and last at least 20 years. Until then, ABI members will voluntarily continue to meet their flood cover commitments under the current Flood Insurance Statement of Principles.
Simon Douglas, director of AA Insurance, said: "The recent flooding in central Europe, Canada and India all serve to keep the issue of weather extremes top of mind. It's vital that the Government and the insurance industry work together to strike the right balance between flood defence spending and helping those who do suffer flooding to rebuild their lives."
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