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Insurance Brokers call for Government to confirm commitment to spend insurance premium tax on flood defences

The announcement of the General Election in December, and the recent flooding in the North of England, has prompted the British Insurance Brokers’ Association (BIBA) to call upon the future Government to confirm that it will continue with its commitment to ring-fence money collected through Insurance Premium Tax (IPT) for flood defence spending.

Written by Paul Brown on 28th November 2019

Insurance Brokers call for Government to confirm commitment to spend insurance premium tax on flood defences

The announcement of the General Election in December, and the recent flooding in the North of England, has prompted the British Insurance Brokers’ Association (BIBA) to call upon the future Government to confirm that it will continue with its commitment to ring-fence money collected through Insurance Premium Tax (IPT) for flood defence spending.

It is estimated that up to 5.4 million properties in England are at risk of flooding from rivers and the sea. Insurers employ sophisticated flood mapping systems which indicate areas most likely to flood and Insurance Brokers find it challenging to obtain flood cover at a reasonable premium, or even any flood cover at all in areas which are deemed most at risk. In 2013, the Government and the insurance industry launched a joint flood insurance scheme called Flood Re to make flood cover more available and more affordable, but the problem remains for businesses in many locations.

IPT, is a tax paid upon insurance premiums and currently represents a 12% surcharge on all premiums, excluding those for travel insurance. The rate was increased to the current level of 12% in 2017, having been increased from 9.5% to 10% in 2016. When introducing the increased rate of IPT in 2016 the Government said that this increase would be ring-fenced to pay for flood defence and resilience measures. The Government commitment was to invest £2.5 billion in capital funding for flood defences for the period 2015-16 to 2020-21, stating that the six year investment would protect a further 300,000 properties and reduce flood risk by 5 per cent.


Research commissioned by Flood Re and conducted by Risk Management Solutions suggest that flood defences save the UK £1.1billion per year. It shows that inland flooding would, on average, cost almost 3 times more on an annual basis without the defences – a bill of £1.8 billion rather than £0.7 billion across the whole of the UK. In England, the Government currently spends around £0.6 billion each year on building and maintaining flood defences, with the Environment Agency recently recommending an annual spend of £1 billion on all flood risk management.

In addition to preventing more and more property owners suffering the utter devastation of a flood event, spending on flood defences represents excellent value for money. However, as each of the major parties introduces a whole host of spending commitments in this election campaign, BIBA has issued a timely reminder that the pot of money paid via increased IPT by policyholders, and earmarked for flood defence spending, should not be absorbed into general Government revenues and spent in other areas.

Source:

https://www.biba.org.uk/latest-news/biba-calls-for-continued-government-ring-fencing-of-insurance-tax-spend-on-flood-defences/

https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7514

www.abi.org.uk/news/news-articles/2019/06/inland-flood-defences-save-the-uk-1.1-billion-a-year/

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