Ministers claim flood insurance deal is ‘close’ as deadline looms

The Association of British Insurers (ABI) wrote to the Government to confirm insurance firms are prepared to offer a one-month extension to the long-standing ‘Statement of Principles’ which guarantees at-risk homes and businesses can obtain cover.

The deal was due to expire at the end of next month, with homeowners and MPs from flood-hit areas concerned that some 200,000 people will be unable to obtain insurance if no new deal is agreed soon.

Negotiations over a new agreement, potentially involving some sort of Government subsidy to cover the increasing flood risk across large parts of the country, have been ongoing for well over a year without a breakthrough.

The letter, from ABI director-general Otto Thoresen, makes clear there are “still important issues to resolve”.

But he adds: “In order to address the remaining issues, and to ensure that those most at risk of flooding across the UK can continue to access insurance while negotiations are taking place, ABI members have agreed they will continue to meet their commitments voluntarily for one additional month, until July 31.”

Speaking in the Commons, Environment Secretary Owen Paterson said “the tone of the letter” supported his claims a deal was now “very close.”.

“We are at an advanced stage in negotiations,” he said. “We are aiming to conclude negotiations as soon as possible to ensure that households can continue to access affordable insurance.”

The Environment Secretary said it was a matter of “real priority” and said the goal was not to place a long-term burden on taxpayers.

“I think the fact that the ABI have told us that we only need one more month to conclude these important discussions shows how close we are,” he said.

Mr Paterson said the Government could use the forthcoming Water Bill, to be brought forward late this summer, to implement any new deal.

“This is a very complex issue, what we are trying to do is to get a long-term solution and sort out the conundrum of affordability, comprehensiveness and not being a long-term burden on the taxpayer,” he said.

Thirsk and Malton MP Anne McIntosh, a Tory backbencher who chairs the Commons environment committee, said the announcement was “welcome”.

But Labour MPs attacked the Government for allowing the negotiations to drag on so close to the deadline.

Former Environment Minister Ben Bradshaw said: “A one-month extension is simply not good enough.

“The Government have had three years in which to sort out the problem, and, in the meantime, householders and businesses face huge hikes in their premiums because of the uncertainty.”

And Hull MP Diana Johnson claimed senior figures in the Treasury are blocking a deal with the ABI for financial reasons.

“Almost a year ago, the then-Secretary of State told me that a deal on flood insurance was imminent,” she said. “Is not the real villain of the piece here the Lib Dem Chief Secretary to the Treasury (Danny Alexander), who has blocked a deal being reached?”

But Mr Paterson dismissed this as “complete nonsense”.

He said: “The Chief Secretary and senior Ministers are all working closely together on this issue.

“I am sorry we may have nearly shot the Labour party’s fox. We are working closely with the ABI, and we will deliver a good deal.”

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