Contribution
My Lords, I, too, thank the Minister for introducing this statutory instrument to ensure that flood reinsurance can continue to operate effectively. For that reason, His Majesty’s most loyal Opposition are pleased to support it. Although the measures are necessary, they raise several questions about the future of the Flood Re scheme and the Government’s broader approach to flood risk and resilience.
The flood reinsurance scheme established under the Water Act 2014 was designed to provide much-needed reinsurance for household insurers facing flood risk, ensuring the availability and affordability of flood insurance for properties at risk of flooding. This initiative, introduced by the previous Conservative Government, remains a crucial safety net for many home owners across the country. It has offered vital support as we face increasing flood events that threaten the stability and safety of homes across Britain.
However, we must recognise that the scale of flooding is rapidly increasing. Recent assessments by the Environment Agency indicate that approximately 6.3 million properties in England are at risk of flooding from rivers, seas or surface water. This is projected to increase to 8 million properties by 2050, reflecting the escalating threat posed by climate change and extreme weather events. This highlights the importance of ensuring that the Flood Re scheme is sufficiently robust to support the growing number of home owners at risk.
The statutory instrument proposes an increase in the total levy from £135 million to £160 million. The Government’s assessment indicates that this rise will likely be passed on to consumers, resulting in an estimated increase of £1.60 per household insurance policy. Although this increase may seem modest on an individual basis, it raises concerns about the cumulative effect on policyholders, especially those already facing higher premiums due to rising costs in other areas. This adjustment reflects the growing challenges the scheme faces in a world where extreme weather events are becoming more frequent and severe.
His Majesty’s Official Opposition acknowledge the necessity of this adjustment, given the financial pressures on reinsurers, driven by factors such as inflation, global natural catastrophe claims and the need to preserve the scheme’s financial resilience. If the rate and risk of household flooding continue to rise, can the British people reasonably expect these annual increases in insurance premiums to become the norm?
I have several other key questions for the Minister today. First, can she confirm whether the Government have consulted with industry stakeholders about the feasibility of expanding the Flood Re insurance scheme, particularly in high-risk areas and to houses built after 2009?
I am most interested in the Minister’s response to my noble friend’s question regarding farmhouses and buildings. Although these are likely to have been sited in less flood-prone locations, the Government have made significant commitments to building 1.5 million new homes in the coming years, a substantial increase on the recent rate of building completions. As my noble friend Lady McIntosh of Pickering highlights, how does the Minister intend to protect these new homes from flood risk, particularly those in high-risk areas? Will the Government commit to ensuring that all new developments are designed with flood resilience in mind?
Could the Minister confirm and explain the role she sees for nature-based solutions in the management of floods at a catchment level in future? Here, I declare my interest, as set out in the register, as the owner of land in a number of river catchments.
Finally, can the Minister inform us what progress is being made in the transition from Flood Re to risk-reflective pricing for household flood insurance when Flood Re expires in 2039? We are approaching midway in the life of Flood Re and it would be desirable to see some progress.
These are questions that go to the heart of the Government’s approach to flood risk, resilience and insurance. While we understand that the increase in the levy is a pragmatic measure in the light of global challenges, we must not overlook the broader implications of a changing climate and the evolving risks that flood-prone households face. With that, I look forward to hearing the Minister’s response to these questions.