Business groups and insurers called on the government to change its upcoming nonprofit Flood Re insurance program in the wake of recent widespread flooding across the United Kingdom.
Flood Re, which is slated for introduction in the summer of 2015, would be funded by a levy on insurers that underwrite homeowners insurance. Money collected through the levy would be used to purchase reinsurance to cover losses paid by insurers.
If losses exceeded the limits of that reinsurance coverage, a supplemental levy would be charged to insurers, according to the government's proposals.
The Blackpool, England-based Federation of Small Businesses last month called on the government to rethink its plan and include small businesses in the scope of Flood Re.
“Since last summer, small businesses in flood risk areas have often been unable to access affordable and adequate insurance,” the federation said in a statement. “We want the government and the insurance industry to look again at the scheme they have in place for households in these areas, Flood Re, and see whether small business can be reinstated into that.”
The leader of Hamilton, Bermuda-based Hiscox Ltd., which has large operations at Lloyd's of London and in the U.K. personal and small-to-medium-size-enterprise insurance sector, also criticized plans for Flood Re.
In a statement, Hiscox CEO Bronek Masojada said that one in six U.K. households would be excluded from Flood Re, including many currently affected by flooding.
While the proposed plan is a great concept, he said it falls short in practice.
“An urgent rethink is needed,” Mr. Masojada said. “It is unreasonable to exclude new homes, buy-to-let properties and higher-value properties from Flood Re protection.”
While Hiscox supports “a sustainable, mutualized solution to the problem of insurance,” he said, “the government must listen to growing concern from insurers and the public.”