Flood Re criticised; ABI responds

Flood Re, the UK Government’s scheme to pool flood risk, has been criticised by the Climate Change Committee (CCC) for higher than necessary costs.

In a letter addressed to Flood Re’s chief executive, Brendan McCafferty, Lord Krebs who is chairman of the CCC’s sub-committee on adaptation, said the scheme was “needlessly expensive”.

According to the CCC, with Flood Re set to “subsidise many hundreds of thousands of households more than the estimated number that might struggle to afford cover in a free market,” the costs of Flood Re will be three times the economic benefits.

Krebs said that Flood Re’s costs are higher than necessary at the expense of other households’ insurance bills, meaning value for money is poor. He added that this would be made worse if Band H households are included within the scheme, as the Government is “now content to allow”.

In reply, the Association of British Insurers (ABI) said: “Measuring the benefits of Flood Re in terms of economic return does not take account of the significant benefits that it will enable for hundreds of thousands of customers across the UK who, in the absence of Flood Re, would face the awful prospect of suffering flooding without the ability to access affordable flood cover.

“Flood Re is being built by the insurance industry and, without it, the cost of helping people rebuild their lives after a flood would either fall to Government or to the victims themselves. Recent floods have proven that this is best owned and managed by the insurance industry, and Flood Re allows this to happen, without Government and taxpayers having to bear the potential risk of flooding which is measured in billions of pounds.”