New ABI guidance for flood insurance by      New Year

Local planning authorities and developers will soon be told the terms of a new agreement between the insurance market and the Government over the provision of flood cover for properties.

The Association of British Insurers (ABI), which represents 450 companies operating in the UK, is drafting new guidance to be published in December.

It will advise builders and planners that the current ABI Statement of Principles, which set out the willingness of insurers to offer flood protection for properties, will no longer apply to properties, both residential and commercial, built after 31 December 2008.

The current agreement, renewed in July this year, is due to expire in five years. But, from January, new buildings will be exempt and insurers will be able to refuse to cover the buildings that are deemed to have been constructed in a high risk area.

The ABI’s Media Manager for General Insurance, Malcolm Tarling, says: “The Statement of Principles will no longer be in effect for new buildings after January 1, 2009, and we are issuing new guidance to the local planning authorities and property developers to ensure they are fully aware of the implications of building on flood plains and in areas likely to be prone to flooding.

We believe this is a serious issue for not only insurers but also families and businesses, and we hope that this will create a renewed focus on the issue of where new properties are sited.”

He adds: “The Statement of Principles will remain in force until 2013 at which time we are hopeful the Government would have implemented a series of measures to reduce the risk of flooding in many areas".

“The guidance is currently being drawn up and we intend to produce it in December to give local authorities and planners adequate time to assess the impact on their decisions.”

The news comes as Lloyd’s announced its inclusion of a UK Flood disaster scenario in its 2009 planning. It will require syndicates in the market to assess their exposure to a scenario based on a heavy rainfall event moving from west to east across south-east England.

Vinay Mistry, Manager in the Exposure Management team, said: "Lloyd's has also been supportive of industry calls on the Government to ensure that adequate funding is devoted to the maintenance and improvement of the UK's flood defence systems."