Flood Reinsurance (Scheme and Scheme Administrator Designation) Regulations 2015

Lord Moynihan Excerpts

Tuesday 27th October 2015 Grand Committee

[Baroness Jones of Whitchurch]

I am very pleased to hear that, but I noted that some of the evidence I looked through, which was received during the consultation period, raised that as a concern. If we can clarify that there is a standard flood map system I am more than happy to hear that. I am sure it will be of some relief. I am sure that the Minister will also clarify that.

I was talking about who was included and excluded and the designation of domestic properties. The Minister will know that there was some concern, during the course of the Water Bill, about those who were excluded from this provision, in particular the poorest and most vulnerable—those in tenanted and rented properties, which are currently excluded from the scheme. It does not seem right that the same property or adjoining properties could have access to different standards of flood insurance purely on the basis of the status of those who live in the property. Will the Minister clarify whether that is his understanding? Will he also clarify whether farmhouses are to be excluded from the scheme? As he will know, this is of some concern to the National Farmers’ Union. They are, after all, primarily residential properties, even if the farmhouse acts as a business address for the farm. I would be grateful to hear his comments on that.

Finally, we all have sympathy with the householders caught up in the major floods of recent years, but it is important that this scheme does not reinforce complacency in the sector. There is a real risk of increased flooding from the effects of climate change. This scheme needs to be combined with drivers of behaviour change among consumers, businesses and government. The Minister referred to that. It is crucial that future flood management policies take a stronger line against building homes in high-risk areas, while developing sustainable land use plans and restoring flood plains. I hope that the Minister can reassure me that Flood Re will take these responsibilities seriously as part of its brief, and that the Environment Agency will receive sufficient funding to oversee those objectives effectively. I look forward to his response.

[Lord Moynihan (Con)]

Before my noble friend the Minister responds, I rise as one of the gently scrutinising antagonists in Committee and further stages on the original Bill. We are now reviewing the regulations that derive from it. I really do congratulate the Minister, his predecessor and Defra officials on the remarkable work undertaken on this. I hear what the noble Baroness says about timing, but this is a very short timescale to have made the progress that we have—to move from Royal Assent to today. We should place on record our thanks to all those who worked exceptionally hard to achieve that objective.

I simply want to echo a point the noble Baroness raised. When it comes to the first review it is very important that the scope of application of these regulations and the Flood Re scheme should be fully considered. During our earlier debates there were concerns. The noble Baroness alluded to one, about people living in similar buildings, or, indeed, the same building in different circumstances, being in different receipt of the Flood Re provisions. When it comes to the review we need to assess the impact of that on local communities and on those affected. I hope that the Minister will echo that that will be possible.

Finally, on flood maps, given the important work done by the Environment Agency and the insurance industry on those maps, it is vital that the water companies are also party to those discussions. I understand that government is already actively engaged, for the first time, with water companies on potential contributions to coastal flooding schemes and to the impact of flooding in their designated areas. It is important that the water companies are party to those discussions.

I conclude by thanking the Minister and the team again. I congratulate him on bringing forward these regulations in a timely fashion, and on the work that has been done to ensure that what looks like an outstandingly good scheme is now being implemented—but which will always be, I hope, subject to review and improvement in future.

[Lord Gardiner of Kimble]

My Lords, as is traditional, I thank all noble Lords for taking part in this debate, but what is perhaps exceptional is that we all wish these regulations success in a very genuine sense because many of your Lordships have been through all the machinations of getting to this point. One of the points that I would like to play back is that I am the Johnny-come-lately in arriving at Defra, and it is very much to the credit of my noble friend Lord De Mauley and all the colleagues who worked with him that we are now where we are. Perhaps I may also acknowledge what the noble Earl, Lord Kinnoull, said about the co-operation and work of the insurance industry. I would like to place on record our thanks to the industry for the hard work and commitment that has gone into progressing Flood Re. Indeed, it is a great example of how the Government and the insurance sector have worked and are still working closely together, in this case to ensure resilience to floods, and in fact making a real and positive difference to many people’s lives. I think it is fair to say that we can all be proud that the UK has in its insurance sector a world-leading brand.

A number of questions have been asked, and it was absolutely right of my noble friend Lord De Mauley to mention flood defences. The Government have been tackling flooding from both ends, and obviously the capital investment has been very considerable, as my noble friend said. We hope and expect these flood works to reduce the risk for more than 300,000 households on top of the 250,000 homes which have already been protected by work undertaken during the last Parliament. It is probably also worth saying that the programme is forecast to reduce the flood risk for up to 420,000 acres of agricultural land, which will avoid more than £1.5 billion-worth of direct economic damage to farmland. Some 205 miles of railway are protected, along with 340 miles of road. With good reason, this is public investment that I hope we will see bearing fruit, and it is very important indeed.

The noble Baroness, Lady Jones of Whitchurch, asked a number of questions, the first of which was about the timing of regulations. It will be a matter for Flood Re itself, once it is authorised by the Prudential Regulation Authority, to determine when it will be in a position to offer cover, but the fund has assured Ministers that April 2016 is a realistic date to become operational. Indeed, when I met the chief executive officer, Brendan McCafferty, only yesterday, I was impressed by the work that has been done and he was similarly of the view that it is an entirely realistic date.

However, this rather plays into what the noble Baroness, Lady Jones, wanted to tease out as well, which is that insurers have agreed to continue to abide by their commitments in the statement of principles, ensuring that householders have access to flood insurance until Flood Re is fully operational. Obviously I take the strictures that the noble Baroness has put to the Government, but I think what my noble friend Lord Moynihan said is relevant. I come to this afresh, and it is clear that an enormous amount of intricate work has had to take place with the insurance sector, the department and with many interested groups. I think that we have made extraordinary progress, given all the complexity.

The noble Baroness also asked about the transition plan. One of the fundamental purposes established in primary legislation for Flood Re is that it is responsible for managing the transition to risk-reflective pricing of flood insurance for households. The transition plan will cover a multi-year period, and it is right and proper that adequate time is given to develop it. But the transition plan will be a public document and Flood Re is accountable to Parliament for it. The plan will be reviewed at least every five years, in line with the review of the levy and the premium thresholds. The noble Earl, Lord Kinnoull, and my noble friend Lord Moynihan asked about the review. As I said in my opening remarks, reviewing as and when necessary will clearly be important. This is a new body and we wish it well but it is important that these matters are kept under review and that there is this accountability to Parliament.