CML news & views

Lenders have welcomed the announcement by the Association of British Insurers (ABI) and the government of a package of measures that should ensure that flood insurance remains widely available. Insurance is essential for a lender to agree a mortgage, and the announcement will help underpin confidence in the housing market at a difficult time.

The agreement between the ABI and the government is based on delivering:

• a long-term investment strategy from the government, setting out strategic flood prevention aims and assessing policy options and funding needs;
• measures within the planning system that will prevent inappropriate development in areas at risk of flooding;
• measures to raise awareness in areas where flood risks are significant, encouraging property owners to take sensible precautions; and
• better access to home insurance for households with low incomes.

Both insurers and the government believe that this package of measures will produce a competitive flood insurance market. From 2013, it will replace the statement of principles – an agreement between the ABI and the government on measures to ensure that flood insurance remains available. Until then, insurers will continue to:

• make insurance available to homes and small businesses in areas where the annual risk of flooding is statistically no worse than once in 75 years; and
• offer flood cover to existing customers at significant risk of flooding, providing there are plans to reduce this to acceptable levels within five years.