Flood Re aims to replace existing flood insurance subsidy
A flood insurance plan in the United Kingdom is in threat of falling through because of the government’s refusal to provide a financial backstop. The plan, called Flood Re, is meant to provide flood insurance coverage to homes and properties in high risk areas in the UK. The plan is meant to replace a subsidy that provides flood insurance coverage to consumers in high risk areas, which is scheduled to expire in July 2012. If the subsidy expires, more than 200,000 homeowners will lose their flood insurance coverage.
UK insurers throw support behind Flood Re plan
Flood Re has a great deal of support from the UK insurance industry. The flood insurance plan is considered to be a major boon for homeowners in high risk areas because it is often the only way they can find protection against flood damage. Many property insurance companies are disinclined to offer flood insurance protection because of the financial risk these properties represent. Insurers are, however, not willing to see the plan collapse and have been working to introduce a way for Flood Re to continue.
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Government shows apprehension on financial aspects of plan
Flood Re is meant to replace an existing flood insurance subsidy program and insurers want to make sure that it is financially viable. As such, insurers are suggesting that households in low-risk areas pay a modest tax into a fund that would cover claims generated by flood damage in high risk areas. Taxpayers would thus be considered a last resort insurer if the flood insurance fund were to exceed its capacity. The UK government has, however, shown some concern with such a plan.
Plan must be approved by Christmas in order to replace subsidy
The UK government is currently fighting off its own debt, which has made it leery of financial plans that could put economic burden on the country’s residents. Some government officials consider the Flood Re plan to be a financial burden, thus may be inclined to reject the plan outright. Insurers note that the plan must receive approval by Christmas of 2012 if it will have a chance of replacing the flood insurance subsidy already in place.