After negotiations with the Association of British Insurers, this new agreement replaces the current ‘Statement of Principles’ that runs out at the end of July and will bring peace of mind to people who will soon need to renew their insurance.
The new agreement will cap flood insurance premiums, linking them to council tax bands so that people will know the maximum they will have to pay.
To fund this, a new industry-backed levy will enable insurance companies to cover those at most risk of flooding. All UK household insurers will have to pay into this pool, creating a fund that can be used to pay claims for people in high-risk homes.
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."
Paul Broadhead, Head of Mortgage Policy at the Building Societies Association said:
"Today's announcement by DEFRA and the ABI is very welcome. This new insurance agreement removes uncertainty for hundreds of thousands of consumers by ensuring that affordable flood insurance cover will remain available to those who live in places prone to flooding. It also banishes the spectre of mortgage issues which could have affected mobility and prices in these areas.
"Longer term the Government's capital investment in flood defences will safeguard thousands of homes and businesses and in doing so will help protect the environment and the economy and deliver peace of mind to many. The BSA will participate in the consultation process."
A spokesperson for Aviva comments:
"We are pleased that progress has been made and there is now a framework in place to provide affordable and widely available insurance to help those most at risk of flooding. We will continue to work with the industry and Government on finalising the details of the new not-for-profit insurance pool. We can reassure our existing customers that we will continue to offer flood cover and pay any claims while the scheme is developed."
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."
