Insurance premiums may increase to ensure flood-hit homeowners get

UK householders face higher home insurance premiums so that those in high flood risk areas can still get cover.

The Association of British Insurers (ABI) says that the insurance industry and the government are discussing a scheme to ensure that 200,000 households affected by flooding will be able to renew their policies next year.

The scheme, proposed by the ABI, means a cap on premiums. Any house that would normally incur a much higher premium because of flood risk will have the extra paid out of a levy on every home policy in the UK.

Insurers agreed a statement of principles with the government in 2008 to renew cover ? usually at a very high premium and with an even higher excess ? for flood victims. But this agreement runs out on 30 June 2013, and householders then face being refused insurance unless the government and the industry come to a new agreement.

A spokesman for one insurer said that providing cover for people in high-risk areas such as Hebden Bridge, which has flooded three times in as many weeks, was becoming assurance rather than insurance; covering an event that would definitely happen, rather than a risk.

He added: There are policies being written now that will not be offered renewal next year unless the government acts soon.

The ABI said a scheme called Project Noah, which would involve reinsuring flood risk on the international market, had now been discounted.

A government spokesman said: We have not yet arrived at an agreement, but discussions with the insurance industry continue to be constructive and we are working together to reach a solution that is practical and affordable for households. Were mindful of those on lower incomes living with the risk of flooding. Thats why were considering ways to keep flood insurance affordable for those who might struggle most with premium increases.

The ABI estimates that damage caused by the floods in the last few weeks amounts to between ?200m and ?300m.

Source: http://www.txinsurancepro.net/?p=542

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