The Association of British Insurers is warning that as many as 200,000 homes will become uninsurable against flood risk when an agreement about existing cover with the Government ends next year.

Under the agreement, insurers currently provide cover for high-risk properties with the Government continuing to improve the nation’s flood defences. The insurers claim that the existing pact has distorted the market and want the Government to share the risk for the most-vulnerable properties.

The argument has significant political overtones - the ABI has already released data mapping which homes are at most risk of flooding in England and Wales and later this morning will publish further maps identifying the homes by individual constituency.

The powerful House of Commons all-party Public Accounts Committee has also entered the fray with the publication today of its 64th Report of this Session which, on the basis of evidence from the Department of Environment, Food and Rural Affairs and the Environment Agency, examined how they manage flood risk in England.

Flood protection is a national priority and features on the National Risk Register of Civil Emergencies. According to the Committee, the annual cost of flood damage has been £1.1 billion and is set to rise, with 5.2 million homes at risk of flooding.

The Rt Hon Margaret Hodge MP, Chair of the Public Accounts Committee, today said it was unclear where the buck stops and who is ultimately responsible for managing  the risk of flooding. She commented:

“There is also a great deal of uncertainty about whether there will be enough money to maintain and improve flood protection in the longer term, and who will pay.

“The Department tells us that it is not ultimately answerable and shares the responsibility with the Environment Agency and local bodies. But the Department has no way of knowing whether local flood management systems are adequate or when it should step in.

“It is not acceptable that local people should be left in doubt about where responsibility and accountability lie.”

The Committee is sceptical about Defra’s view that more funding will come from local sources – including businesses and local authorities – at a time when they are themselves under financial pressure.

Margaret Hodge added:

“All of this is fuelling uncertainty over the future availability and affordability of insurance cover for buildings in areas at risk of flood. The current agreement between the Government and the insurance industry runs out in 2013. A new agreement is needed urgently."

In 2010-11 the Department for Environment, Food and Rural Affairs (the Department) spent £664 million on flood and coastal risk management, 95% of which went to the Environment Agency.

There have been significant changes in funding arrangements for flooding. In 2009 the Agency projected that its flood risk management budget needed to rise by 9% during the spending review period (2011-12 to 2014-15) simply to maintain the status quo However during the same period the Agency’s flood risk management budget has been reduced by over 10%.

The Committee described Defra’s wish to increase local contributions from £13 million to a £43 million contribution from such sources, although it had not yet secured these commitments, as over-optimistic. Commenting on evidence it had received from Defra, the Committee said:

“We were very concerned that the Department did not accept ultimate responsibility for managing the risk of floods. The Department told us it shared responsibility with the Agency and local bodies. We are concerned that there is no clarity about where the buck stops. It is not acceptable that local people do not know clearly where responsibility for decisions lies and which body is answerable when things go wrong.”

Defra relies on inconsistent and unstructured intelligence

Defra also came in for heavy criticism for its reliance on “inconsistent and unstructured intelligence” on local flood risk management performance. The Committee said that while local authorities are producing risk assessments the Department did not have plans to assess their quality. The Department needed reliable information to inform its decisions on when and where to intervene if local risk management plans were inadequate.

Local communities being asked to pay more towards flood protection and take on more of the risk should also be better engaged in the decision-making process. The Committee said that the present consultation arrangements on flood defence proposals are not consistent across the country.

The Committee is now calling on Defra to come to an early revised agreement with the insurance industry in order to reduce uncertainty for affected householders in high flood risk areas.

Download the full Committee report here.