Property industry welcomes ‘long-awaited’ flood solution…
The British Property Federation (BPF) has welcomed confirmation that flood insurance will continue to be available to households and businesses beyond July following an announcement this morning by Chief Secretary to the Treasury Danny Alexander.
The ‘Flood Re’ proposal, to be consulted on, will limit the amount hundreds of thousands of people in at risk areas will pay for insurance, rather than reverting to the open market and seeing swathes of property across the country rendered worthless.
The BPF had warned throughout the process that a solution between insurers and the Government must be found as property without insurance is essentially worthless. Key elements of the proposal include:
- Flood Re will be run and financed by insurers as a not –for- profit fund which will cover the cost of flood claims from high risk homes.
- Insurers will pass the flood risk element from those households deemed at high risk of flooding to the fund. Premiums for the flood risk will be calculated based on council tax banding up to a maximum limit depending on the Band.
- Flood Re would charge member firms an annual charge of £180million.This equates to a levy of £10.50 on annual household premiums and represents the estimated level of cross-subsidy that already exists between lower and higher flood risk premiums.
- Flood Re will be designed to fully deal with at least 99.5% of years. Even in the worst half a per cent of years, Flood Re will cover losses up to those expected in a 1 in 200 year – a year six times worse than 2007 – with Government taking primary responsibility – working with the industry and Flood Re – for distributing any available resources to Flood Re policyholders should claims exceed that level.
Ian Fletcher, director of policy at the British Property Federation, said: “This is welcome news and will come as a huge relief to property owners across the country that have been living with uncertainty about flood insurance.
“It’s clear that without an agreement with Government the insurance market would not be able to offer protection in high risk areas, and with recent flood incidents still fresh in the memory this would have been an unpalatable outcome.
“Universal flood cover was always a prize worth persuing, as is ensuring it remains affordable to everyone.”
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