Flood Insurance

Jonathan Evans Excerpts

Tuesday 26th March 2013 Commons Chamber

[Jonathan Evans (Cardiff North) (Con)]

I begin by drawing attention to my entry in the Register of Members’ Financial Interests and to my chairmanship of the all-party group on insurance and financial services. It is in that context that I think it is helpful to share with the House some of the observations that have been made by the insurance press about the discussions with the Government over recent years, which Post magazine has described as “negotiations to nowhere”.

It is astounding that it was in 2008 that the insurance industry made it clear that it would be withdrawing from the statement of principles. May I make it absolutely clear that it is important that it should do so, because many of the individual cases that Members have drawn attention to here are not covered by the statement of principles? They are not in this jeopardy because of the expiry of the statement of principles; the statement of principles does not have an “all circumstances” provision. That is why it is necessary to address the matter.

In 2008 I was in the European Parliament, and I was surprised to see that no progress had been made by the time I came here in 2010. I am astounded, frankly, that here we are in 2013, barely weeks away from the statement of principles ending, and still there is no progress to announce. It is not as though we have not dealt with these issues before. The insurer of last resort is, in fact, the Government. They took on that role in relation to “Pool Re”, when we needed to create terrorism insurance, and it was done in a matter of weeks. The Lloyds-Equitas debacle, which I had ministerial responsibility for resolving, was resolved within 12 months. Following 9/11, no insurance was available to the aviation industry in this country, and that matter was resolved by Government within a matter of days. Yet here we are, years and years later, with no progress to announce.

I commend my hon. Friend the Member for Esher and Walton (Mr Raab) for securing this debate and for his speech. He has called for good faith on the part of the insurance industry and for a Government contribution. That has also been said by other Members and in The Times leader to which reference has been made.

On good faith in the insurance industry, the all-party group on insurance and financial services has held three meetings since the election specifically on these issues. People have attended from the Association of British Insurers, on every occasion, from the British Insurance Brokers Association, on every occasion, and from the National Flood Forum. People from Aon, from Guy Carpenter and from Marsh have outlined the range of proposals that they have been making to Government. In an all-party group meeting on 12 October, Aon raised for the first time a variation on the “Flood Re” proposal, but we do not know what the Government’s response has been. In November, there was a bit of a spat when the ABI thought that the Government were not going to make any contribution. In response, it was claimed that it was nonsense to say that there was an impasse. Yet here we are, approaching the Easter break, and we still seem to have an impasse.

I do not blame the Minister. He attended a flood summit back in 2010, and he absolutely understands all the issues. However, I wonder to what extent his hands are tied elsewhere, perhaps not so much by the change in Secretary of State but by the involvement of the Cabinet Office in some aspects of these discussions. It is said that the Government may have been spooked by the original discussions, which had been going constructively, when they looked at the overall cost of flooding. However, that is not good enough. We have heard it suggested that there could be an extension of the statement of principles, but that is a voluntary agreement with the industry, and it is not going to happen; we can rule it out. The reality is that we will either see a return to the free market or the Government will have to get their act together, and soon.

--- Later in debate ---

[Neil Parish (Tiverton and Honiton) (Con)]

It is a great pleasure to speak in this debate. I, too, thank my hon. Friend the Member for Esher and Walton (Mr Raab) for securing it and the Backbench Business Committee for holding it.

Flooding has been a particular problem in the past year throughout my constituency. Tiverton, Cullompton, Seaton, Axminster and Uplyme have all been affected by flooding and Feniton has been flooded several times. We need to ensure that my constituents and people across the country get flood insurance that they can afford.

I have a great deal of respect for my hon. Friend the Member for Cardiff North (Jonathan Evans), but he speaks, naturally enough, on behalf of the insurance industry. It is a wonderful industry, but it is not terribly charitable. It is there to make a profit. There is nothing wrong with profit, but we must not set up a system that puts a levy on all insurance payers in order to pay for those in flood-risk areas.

[Jonathan Evans]

I do not want my hon. Friend to miss the fact that the “Flood Re” scheme, about which everybody has spoken, is a not-for-profit scheme. It is important that everybody recognises that.

[Neil Parish]

I thank my hon. Friend for correcting me about that being a not-for-profit scheme, but that was not the point I was making.

My point is that when we levy all insurance payers to build up a fund that takes the risk of properties in high-risk areas away from the insurance companies, we should not be too generous because insurance companies are all about taking risk. That is what they are in business for. They should therefore be able to take their fair share of risk. I want to ensure that the insurance companies step up to the plate, but also that the Government help those who, in their areas, cannot get flood insurance under a private scheme on the free market. That is the balance that must be struck.