Insurers claim flood talks 'at crisis point'

Insurers say they have had to take the "lead" on plans aimed at ensuring flood-risk households in the Westcountry can still get cover in the "absence of any proposals" from government.

The pointed sideswipe at Whitehall came as the Association of British Insurers urged the Government to work with the industry in providing a long-term affordable solution, amid warnings homeowners could find it difficult to get mortgages or sell their properties.

It is a sign of the continuing friction between the Government and ABI, which has previously said that talks over continuing to provide a safety net for at-risk homes were at "crisis point".

Last year's floods hit Somerset, Devon and Cornwall particularly hard and damaged hundreds of homes and businesses.

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In a submission to a parliamentary inquiry, the industry body also said the extra £120 million recently announced by the Government for flood defences only partly tackled the £800 million funding shortfall needed to tackle the impact of climate change.

It comes as a deadline fast approaches to find a replacement for an existing insurance deal which ends in June.

Without a solution, the ABI warns at least 200,000 households could have significant difficulties in getting flood cover, which may also cause problems for homeowners getting mortgages or selling their properties.

The body made a submission to the Commons Environment Select committee, which is holding an inquiry into flood funding and will hear evidence today.

The insurers' proposed solution to providing affordable cover is to top-slice all insurance premiums to create a new funding pot to cover flooding claims – the so-called Flood Re model.

But while that is being built up, they want the Government to step in to provide a temporary overdraft to cover any shortfall if there were floods in the early years of the scheme before it had built up its reserves.

In its evidence, the ABI said: "In the absence of any proposals from Defra, the ABI has taken the lead on developing a long-term, sustainable framework, to provide widely available and affordable flood insurance through its Flood Re model.

"We urgently need Government to agree to work with the industry to deliver Flood Re if we are to meet our shared policy goals and ensure that the UK has a long-term and sustainable plan to tackle the risk of flooding and the ability of high-risk households to insure their properties."

A Defra spokesman said: "Discussions with the ABI are ongoing. We want to find a lasting solution that secures the affordability and availability of flood insurance for the first time, without placing unsustainable costs on wider policyholders or taxpayers.

"Our primary role is to prevent flooding in the first place. We are on course to spend £2.3 billion on flood risk management, and expect to protect 165,000 more homes by 2015."