LONDON (Reuters) - Affordable flood insurance could become available to households in Britain’s highest-risk areas without government subsidies under a new scheme drawn up by insurance broker Marsh, the company said on Tuesday.
The plan, dubbed Project Noah, would make it unnecessary for the government to provide financial backing to insurers, seen by the industry as the best means of guaranteeing availability of cover in the most flood-prone regions, Marsh (MMC.N) said.
“It takes the problem away from the British taxpayer,” Hutton Swinglehurst, head of flood risk at Marsh UK, told Reuters.
Under the scheme, insurers would pool their residential flood exposure across low and high-risk areas. That would limit the scope for big payouts across the pool as a whole, and enable insurers to reinsure their flood risk at competitive rates.
Reinsurers have historically refused to provide flood cover to individual British insurers because many of them are exposed to one or more flood zones.
“We have the capacity available and pledged by the reinsurance companies, and we believe we have a critical mass of leading insurers to get going,” Swinglehurst said.
Britain has been hit by severe inundations in the past ten years, with a series of floods in the summer of 2007 costing the insurance industry about 3 billion pounds.
Insurers have agreed to provide affordable cover to at-risk homes in return for a government commitment to boost flood defences under a deal that expires in June next year.
The Association of British Insurers said last month that 200,000 homes in flood-prone regions would struggle to find affordable insurance once the agreement came to an end.
The Department for Environment, Food and Rural Affairs, the government ministry responsible for flood defences, welcomed the Marsh scheme.
“Industry-led solutions that allow insurers to compete even for the highest-risk homes, without government intervention in the market, would give the best value for taxpayers’ money,” a spokeswoman said.
Defra plans to spend 2.17 billion pounds bolstering Britain’s flood defences between 2011 and 2015.
Reporting by Myles Neligan; Editing by Helen Massy-Beresford