At-risk homes may lose their insurance

The Association of British Insurers said it was “frustrated” that the Government appears to have ruled out subsidising insurance for high-risk homes without agreeing an alternative.

An agreement thrashed out between the Government and insurers in the wake of the 2007 floods that devastated parts of Yorkshire – which guarantees insurance will be available to homes at risk of flooding – comes to an end in 2013 and the industry wants more action from Ministers before agreeing a fresh deal.

Environment Minister Richard Benyon said he wants a new “shared understanding” agreed by the spring and said his priority is to improve flood defences rather that subsidising insurance premiums, which he said would “do nothing to protect against the wider, non-monetary, health and wellbeing impacts of flooding”.

But Otto Thoresen, director general of the Association of British Insurers, said: “This is a frustrating update from the Government. The insurance industry has spent the last 15 months discussing with Defra how to develop a sustainable way forward on flood insurance for high-risk households but it seems to be listening less and less.

“No country in the world has a free market for flood insurance which provides affordable and accessible cover for high-risk households without some form of Government involvement and it makes no sense to rule out a subsidy before Defra have even done the analysis.

“To ensure potentially 200,000 high-risk households have access to flood insurance in 2013, the Government needs to listen to the insurance industry and help develop a sustainable subsidy model which is paid for either by taxpayers, low-risk households or both.”