With flood alerts and warnings still in place in some parts of the UK, the Association Of British Insurers (ABI) has warned that up to 250,000 residential homes and commercial properties could be left without flood insurance.
The ABI has claimed that it had already reached a crisis point in its talks with the government over replacing an agreement which would ensure that all households in area at high-risk of flooding could still secure some degree of flood insurance. However that was before last week’s heavy rain.
The current arrangement, requires companies to insure high-risk properties while the government continues to improve flood defences, is due to expire in June 2013.
Talks had stalled after the coalition government rejected the ABI’s plan, which the organisation said was ‘simple and elegant’.
The ABI wants the government to share the risk for the areas where residential properties have greater than a 75% chance of flooding.
The ABI has suggested that residential households should have £8 to £10 (GBP) added to their insurance premiums in order to create a £100 Million (GBP) not-for-profit fund to help cover properties affected by flooding.
In order to support the industry while this fund builds up, the Association Of British Insurers want the UK government to approve a temporary, interest-free, overdraft, but this proposal has already been rejected.
Unless new arrangements for flood insurance are made quickly, many residential property owners could see their insurance premiums rise to prohibitively high levels when the current agreement expires in 2013.
Nick Starling, director of general insurance at the ABI, said: “The talks have reached a crisis point. We have had two years to sort this out, during that time the insurance industry’s put a massive amount of work and money into coming up with an insurance-led solution and we seem to have reached an impasse.”
The Government says that talks are continuing with the industry body and it has criticised that ABI for making comments at a time when hundreds of UK homes are being affected by floods.
Environment Minister Richard Benyon said: “It’s really important for people who live at flood risk to know that the Government is determined to find something that’s better than the current arrangement.”
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