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U.K. insurers could face greater risks under proposed Flood Re fund

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Uncertainty about U.K. government spending on flood defenses may mean that the proposed Flood Re reinsurance pool may face higher-than-expected claims in the future, according to Fitch Ratings Ltd.

In a commentary published Wednesday, Fitch said that uncertainty over flood defense spending could mean that the proposed government-backed, insurer-funded Flood Re plan may expose insurers to greater risk.

According to Fitch, while U.K. insurers currently can comfortably absorb losses from recent severe flooding in the country estimated by the Association of British Insurers to total about Ł1.1 billion ($1.65 billion), any long-term reduction in flood defense spending by the government could place more properties at risk from flood damage.

Flood Re is slated to begin operations in 2015.

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