Members of the Morpeth Flood Action Group (MFAG), Morpeth Town Council and the Morpeth and District Chamber of Trade have published a new proposal that, if adopted by the insurance industry and Government, could provide affordable insurance for UK households in areas of high flood risk.
The proposal has been presented to DeFRA, the Government department that oversees the Environment Agency and has responsibility for central funding of flood defence schemes. The Morpeth Herald reports that the MFAG proposal has received backing from the National Flood Forum, other groups in the north of England, and academics.
The 'Morpeth Model' is based on the principle that affordable flood insurance for properties at high risk of flooding would be subsidised from a financial pool established and managed by the insurance industry. The pool would be funded by a Community Flood Levy, added to the cost of all household insurance policies (either as a flat rate or an additional percentage of the insurance premium).
Individual insurers would continue to determine the risk-related premium for each property, but above a certain threshold (determined by Council Tax band) a percentage of the premium would be paid into the pool. In the event of a claim the insurer would be able to draw on funds from the pool to offset part of its loss. Effectively this means the pool would act as reinsurer for part of the exposure in areas of high flood risk.
Another feature of the Morpeth Model is the attention paid to property-level flood resilience. MFAG has simultaneously released a report on resistance and resilience in the context of future flood insurance, written by MFAG chairman Alan Bell.
MFAG is one of the most active community-based flood action groups in the UK. Morpeth in Northumberland has a long history of serious flooding, most recently in September 2008 when the town centre was flooded extensively during intensive rainfall.
MFAG produced an earlier proposal for flood insurance in June 2010. The latest version has been substantially revised following discussions in a working group organised between DeFRA and the insurance industry.
Availability of affordable flood insurance remains an unresolved issue between Government and the insurance industry. The Statement of Principles on the Provision of Flood Insurance, an agreement between Government and the Association of British Insurers that sets out current principles for maintaining the availability of flood insurance in the UK, will expire at the end of June 2013.
In producing its revised proposal MFAG has considered in detail another flood insurance model outlined by Oxera, an economics consultancy engaged to study the issue of affordable flood insurance on behalf of the Association of British Insurers (ABI). Last month the Insurance Times reported that global insurance broker Marsh was preparing a pool-based flood insurance initiative of its own, under the name 'Project Noah'.
The full information:
The Morpeth Model v2.01 (executive summary) (Morpeth Flood Action Group, 30 November 2011)Additional links:
'Flood Insurance in the UK: Our Proposal for the Way Forward, Version 2.01' (Morpeth Flood Action Group, 25 November 2011) (PDF)
'Flood Insurance in the UK: Resistance and Resilience, Version 3.0' (Morpeth Flood Action Group, 29 November 2011) (PDF)
'Action group continues fight for fair flood insurance for householders' (Morpeth Herald, 1 December 2011)
'Why does it always rain on me? A proposed framework for flood insurance' (Oxera, September 2011)
'Flooding and insurance: a roadmap to 2013 and beyond - An interim report of the flood insurance working groups' (DeFRA, 25 May 2011)
'Flood Insurance in the UK: Our Proposal for the Way Forward' (Morpeth Flood Action Group, June 2010) [ superseded earlier version of proposal ]
'Marsh's "Project Noah" initiative to tackle flood cover' (Insurance Times, 17 November 2011)