However, in a joint press statement with DEFRA issued on 11 January the ABI  the Government say they both want to ensure that the risk from flooding is managed effectively and that flood insurance remains as affordable and widely available as possible so that consumers and small businesses continue to be able to protect themselves from the financial cost of flooding.  Since 2000, this has been achieved through a ‘statement of principles on flood insurance’: in the short term this commits insurers to continue to provide flood insurance under certain scenarios and the Government to manage the risk from flooding.  However, they  recognise that the statement of principles may distort the market, hinder the development of specialist flood insurance for the more difficult cases and limit incentives for the uptake of cost-effective resilience measures to protect individual properties.  

According to this press statement the ABI and the Government have agreed to work together to provide a long-term solution that will enable flood insurance to continue to be as widely available as possible without distorting the market.  To achieve this, they say they have identified the following measures that must be taken:

• improve our understanding of flood risk through assessing both the probability and consequences of flooding from all sources including surface water;

• put in place a long-term strategy to reduce flood risk; set out the Government’s short, medium and long term strategic flood prevention aims; assess funding needs; and ensure effective and prioritised allocation of resources and delivery over the medium and long term in line with future Government spending rounds;

• ensure that the planning system prevents inappropriate development in flood risk areas, and that any essential new development in high flood-risk areas is flood resistant and/or resilient;

• raise awareness in areas where flood risks are significant, encourage actions to mitigate and minimise the risks and costs of being flooded; and provide information about how to obtain flood insurance; and

• promote access to insurance for low-income households.

The revised statement of principles, published on the ABI website, will apply from 1 August 2008. It will remain subject to additional review in the event of any significant external shocks, such as a withdrawal of flood reinsurance.  The statement of principles will not apply to any property built after 1 January 2009. 

What is the significance of this new agreement?

The Alde and Ore Association have been in touch with the ABI in order to try to assess the significance of this new agreement.  In principle we agree with the ABI that it does represent a significant new development.  Instead of starting from the assumption that the amount to be spent on flood defences depends solely on funds allocated during the Treasury's comprehensive spending review which only covers three years the Government have agreed to draw up a long term strategy to determine investment needs based on a commitment t defend homes which have a risk of less than 1 in 75 of being flooded. 

At present the Environment Agency's flood maps depict areas with a 1 in a 100 risk of flooding.  But the ABI and Government have agreed that better methods are required to assess the extent to which particular properties are at risk.  One factor which will be taken into account is the extent to which sea and river defences are properly maintained.  The ABI say that they recognise that whether or not overtopping leads to major flooding depends crucially on maintaining defences.

In discussion with the ABI we asked the ABI spokesperson whether the Treasury had been involved in these discussions.  They confirmed that the Treasury had been involved.  This is a welcome development.  However, even though it may be possible as a result of these developments once funding needs are established it seems to us that there is no guarantee than any Government will make the funds available given competing expenditure priorities.  But at least we should begin to get a better idea of the funds need to protect homes at risk of flooding and funds available.  This should help inform public debate on how much we as a nation should be spending on flood defence.

The other worry will be for those whose homes are in areas which have more than a 1 in 75 risk of flooding.  One option for home owners in this position is to discuss with the Environment Agency and their insurers measures which will given them additional protection.  These could include ensuring that temporary flood barriers are available when there is a risk of flooding.

For more information please follow these links:

DEFRA/ABI Joint press statement  ABI Press Statement      ABI/EA Joint Fact Sheet       

BBC news release  Press Association News Release