Water Bill

Written evidence submitted from the Association of British Insurers (WB 05)

I am writing to you to express the ABI’s wholesale rejection of two clauses in the Water Bill relating to Flood Re and published this morning.

We will write to you again ahead of the oral evidence session next Tuesday with a full briefing on the full schedule of clauses, the majority of which we support. However, the inclusion of these clauses is a serious issue and I wanted to alert you as early as possible.

As currently drafted the following clause goes well beyond what was agreed between Government and Industry in the memorandum of understanding, published on 27 June.

Scheme Funding NC3

(2) Regulations under subsection (1) may make provision as to- (a) the circumstances in which a request under subsection (1)(b) may be made;

(5) The Secretary of State may by regulations provide that, where such conditions as are specified in the regulations as regards the reserves of the FR Scheme are satisfied, the FR Scheme administrator must pay to the Secretary of State an amount of the reserves to be determined in accordance with the regulations.

The Memorandum of Understanding (see attached) sets the policy parameters for the continued detailed discussion between Government and Industry; the above clauses exceed those boundaries and do not reflect the agreement between industry and government. We have explicitly rejected these clauses in the process of discussion between Government and Industry. It is also worth noting that DEFRA’s own guidance on the flood insurance clauses acknowledges that industry and government are still in ‘active discussions’ on these aspects.

Respectively, these clauses as currently drafted give new powers to Government and introduce new burdens on insurers that were not agreed in the Memorandum of Understanding and as such are entirely unacceptable to the ABI’s members who are paying for and setting up Flood Re. We urge the government to withdraw these clauses.

With regard to both clauses, the industry has already put forward alternative wordings which provide for a process to tackle the issues without giving the Government fresh powers that did not form part of the MOU agreement.

We are grateful for the opportunity to give evidence to your committee, and the project leader for Flood Re - Aidan Kerr - looks forward to discussing this and other aspects of the flood insurance clauses in further detail next Tuesday.

November 2013

Prepared 4th December 2013