Does the new flood risk agreement really hold water?

flood Re insuranceThe agreement thrashed out by insurance companies and the government for homes at a high risk of flooding does not hold water, according to climate change experts who have examined the problem.

After months of tough negotiations, the government and trade body the Association of British Insurers announced they would continue to safeguard 500,000 homes in flood risk areas by raising a £10.50 levy on all home insurance policies from 2015.

The levy would collect approximately £180 million a year for an independent management fund called Flood Re, which would be used to subsidise insurance payouts for homes hit by flooding.

However, experts at the Centre for Climate Change Economics and Policy and the Grantham Research Institute have pointed out that the flood risk predictions made during the negotiations don’t account for climate change and how that might alter the map of areas prone to flooding.

The government put details of the proposal out for consultation in June, and has yet to confirm the final details of the scheme.

“Flood risk is expected to increase due to climate change and continued development of flood plains for residential and commercial property, which increases the exposure of homes and businesses,” warned Dr Swenja Surminski, one of the authors of the report.

“The design of the Flood Re scheme, which is expected to last until at least 2035, has not taken into account adequately, if at all, how flood risk is being affected by climate change. For this reason, it may prove to be unsustainable because the number of properties in the future that will be at moderate or high probability of flooding has been significantly underestimated.”

The agreement has also been criticized by members of the British Insurance Brokers’ Association for confusion surrounding whether small business will be covered.  At present businesses are covered by the existing ‘Statement of Principles’, but as yet there’s no provision for them in the new Flood Re agreement.

While the industry and the government work on the finer points of the new agreement; the good news is that we have access to some great deals on flood risk insurance. For more information visit our flood risk insurance page or Tel: 0800 089 0467 to speak with an expert.

Find out more about how businesses can cope with flooding

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