Association of British Insurers (ABI)
The Statement of Principles which in its simplest terms is a guarantee that all UK households who purchase Building
and contents insurance are covered for flood damage, will run out in 2013. The Insurance Industry Lead Body, the
Association of British Insurers (ABI) has signalled that it will not renew its commitment to offer flood cover to all.
The floods of 2007 showed the Insurance Industry that offering blanket flood insurance was no longer a financially
viable option.
The ABI told Government some time ago that unless more was done to protect the estimated 750,000 homes thought to be
at high risk of flooding then they could no longer offer flood cover to all. With knock on effects for the mortgages
held on those properties, the resulting loss in cover could be catastrophic for the UK housing market.
So 2013 is a critical juncture for flood insurance in the UK. The Statement of Principles will expire and when it does
a sustainable arrangement to safeguard the wide availability of flood insurance must be put in place. While two years
to this point may seem a long way away, meeting this challenge will require co-ordinated action; action that will
require Government, insurers and consumers working together to develop a model for the future of flood cover. At a
recent conference Government, The Insurance Industry and other interested parties came together to map out the future
of flood cover.
Tom Woolgrove, Managing Director, Personal Lines Insurance, RBS Insurance
Insurance is currently widely available and all stakeholders want to make sure that this is able to continue.
The industry will continue to work with Government and other stakeholders to solve the problems created by the
expiry of the Statement of Principles (SoP). The SoP must expire because it distorts the market – cross subsidy
between consumers is unsustainable, and only 18% consumers believed it is appropriate.
Richard Benyon, MP Parliamentary under secretary for Natural Environment and Fisheries.
Flood Risk Management is a priority for Government, particularly with a focus on deprived communities.
The National Strategy and funding model will be issued on 18th July 2011. On funding, the new model is aiming to
continue investment to the most beneficial projects, but also to allow other projects to go ahead with some support
from government – “payment for outcomes”. New properties built post 2012 will not influence where flood defence
funding goes. We need more work to reflect property level resilience measures in insurance terms.
Francessca Short, UK Head of Insurance Transactions and Restructuring, KPMG
If a cross subsidy has to go completely in 2013 because an appropriate solution has not been found then this will
not be good for the reputation of the industry. It will not be easy for the industry to withdraw cover. A solution
needs to be found. We should consider international models. 2013 is not a long way off – we need to keep working
productively and quickly to ensure that cover can continue to be available.