....[A] combination of increased rainfall and rising sea level is clearly increasing the risk of flooding, and raising costs for both homeowners and insurers.
At present, insurance for properties at high risk of flooding is implicitly subsidised through higher premiums for all policy-holders. However, insurance companies have warned successive Governments over the past few years that the rise in the number of properties at risk of flooding has pushed the existing arrangement to breaking point.
In June 2013, Defra initiated a consultation about a proposal for a new scheme, called Flood Re, to provide cover for high-risk properties, paid for through an explicit levy on all policy-holders’ premiums. Defra's original proposal was accompanied by an Impact Assessment which stated that Flood Re would cover about 500,000 homes, and to pay future claims, £180 million each year would need to be raised through a levy of about £10 on all policy-holders’ premiums.
But the Grantham Research Institute on Climate Change and the Environment pointed out in its response to the consultation that the Impact Assessment for Flood Re, which the Government expects will operate for between 20 and 25 years from 2015, had failed to take into account any increase in flood risk through rising sea levels and shifts in rainfall due to climate change....