To a large extent this lack of concern has been made possible by the statement of principles – an agreement between the government and Association on British Insurers (ABI) which guarantees that flood insurance is available to all home owners in the UK. But this agreement is coming to an end – and soon.
A temporary reprieve was granted last week, when the ABI voluntarily extended the statement of principles by one month from June 30 to July 31 2013 in order to allow more time for discussion on a new agreement before finding a solution.
The ABI is adamant that the statement of principles is not a long-term solution for ensuring the availability of flood insurance, and so extending the current arrangements by one month was a major concession on its part.
Whilst we welcome the temporary extension, the time has long since passed for some certainty on the availability of flood insurance. The concern has always been that without an insurer/government agreement in place a move to an open market would follow.
Such a move could result in flood insurance being removed from standard home insurance policies, meaning homeowners would need to obtain separate insurance cover as is the case in some other countries. An alternative solution to the statement of principles has been under discussion for months, but seemingly little progress has been made.
We are rapidly reaching the point where, so late in the day, transitional arrangements between the old agreement coming to an end and a new agreement coming into force may be necessary – adding further complexity to the problem.
For mortgage lenders, the insurability of their security is a key factor in lending decisions, so clearly the availability of flood insurance is critical to the property market. Almost as important just now is the crying need for some certainty over what is going to happen a few months down the road.
Although it may not feel like it, July will soon be here and so we would urge government and the ABI to redouble their efforts to reach an agreement on flood insurance.
Paul Broadhead is head of mortgage policy at the Building Societies Association
