Water

ABI / GOVERNMENT STATEMENT ON FLOODING AND INSURANCE FOR ENGLAND

1. The Government and the Association of British Insurers (ABI) agree on the importance of managing the risk from flooding to people and property.  As the floods of 2007 demonstrated, flooding can have devastating impacts: it can cause loss of life, displace thousands of people, and can cause major economic and social dislocation.   

2. While flood defences, effective surface water management, flood warnings and other policies can reduce the risk from flooding, this risk can never be completely eliminated.  In the UK, unlike in most other countries, insurance against the impact of flooding has been a standard feature of household and many small business insurance policies since the early 1960s.  This enables households and small businesses to plan for and minimise the financial cost of flooding while insurers provide effective and efficient claims services and repair teams if flooding does occur. 

3. The ABI and the Government both want to ensure that the risk from flooding is managed effectively and that flood insurance remains as affordable and widely available as possible so that consumers and small businesses continue to be able to protect themselves from the financial cost of flooding.  Since 2000, this has been achieved through a ‘statement of principles on flood insurance’: in the short term this commits insurers to continue to provide flood insurance under certain scenarios and the Government to manage the risk from flooding.  However, we recognise that the statement of principles may distort the market, hinder the development of specialist flood insurance for the more difficult cases and limit incentives for the uptake of cost-effective resilience measures to protect individual properties.  

4.The ABI and the Government have agreed to work together to provide a long-term solution that will enable flood insurance to continue to be as widely available as possible without distorting the market.  To achieve this, we have identified the following measures that must be taken:

    • improve our understanding of flood risk through assessing both the probability and consequences of flooding from all sources including surface water;
    • put in place a long-term strategy to reduce flood risk; set out the Government’s short, medium and long term strategic flood prevention aims; assess funding needs; and ensure effective and prioritised allocation of resources and delivery over the medium and long term in line with future Government spending rounds;
    • ensure that the planning system prevents inappropriate development in flood risk areas, and that any essential new development in high flood-risk areas is flood resistant and/or resilient;
    • raise awareness in areas where flood risks are significant, encourage actions to mitigate and minimise the risks and costs of being flooded; and provide information about how to obtain flood insurance; and
    • promote access to insurance for low-income households.

6. The revised statement of principles, published on the ABI website, will apply from 1 August 2008. It remains subject to additional review in the event of any significant external shocks, such as a withdrawal of flood reinsurance.  The statement of principles will not apply to any property built after 1 January 2009. 

HM GOVERNMENT
ASSOCIATION OF BRITISH INSURERS
JULY 2008

AREAS OF CONTINUING WORK FOR COMPLETION OVER NEXT 12 MONTHS


Improving flood risk assessment
  • Establish timetable for incorporation of the EU Floods Directive into law.
  • Establish how to streamline arrangements for providing available flood risk data from the Environment Agency to insurers in an appropriate format under agreed licensing and charging arrangements that enable insurers to use the data for assessing risk, underwriting, pricing and administering insurance.
Reducing flood risk
  • Produce the first version of modelling of flood and coastal erosion risk management scenarios for a 25-year period, to inform the Government’s Long-Term Investment Strategy. These will be published in Spring 2009 and show the impact, outcomes and funding implications of a range of policy options.  
  • Establish how flooding from surface water will be better managed in the future, including necessary progress on who will lead this work, how this will be funded, the responsibilities and powers that will be needed, and ensuring an appropriate regulatory environment for those responsible to encourage flood management measures: this will feed into the Government’s Floods and Water Bill to be published in draft in Spring 2009.
  • Establish and complete a review of outcome measures for the Environment Agency, assessing in particular the case for including measures for the protection of commercial property.
Development planning policy and building design
  • Establish if any policy reforms are needed following the evaluation of the planning policy framework for flood risk.
  • Establish how to improve building design in flood risk areas; and how to encourage homeowners to take steps to protect their homes (consultation expected in 2008).                                                                                         

Page last modified: 11 July 2008
Page published: 11 July 2008

Department for Environment, Food and Rural Affairs