HOUSEHOLDS in Scotland could be subsidising flood insurance on English properties by as much as £430 a year, according to MSPs.
Environment minister Paul Wheelhouse has called on UK ministers to strike a new deal with insurers to reflect the lower risk of flooding in Scotland.
Insurers estimate that around one in four households in England is at risk of flooding (23.1 per cent), against around one in 20 in Scotland (4.5 per cent).
Riskier homes are cross-subsidised by those in safer areas, meaning that a “disproportionate share” of the premiums are paid by Scottish households, MSPs at Holyrood heard.
An existing deal which compels insurers to cover homes at a higher risk of flooding ends in June. Insurers are refusing to extend the deal, insisting that it distorts the market and stalls the development of flood defences.
SNP MSP Chic Brodie said the lack of a deal would make it harder for people in flood-hit areas to get insurance and mean that Scots would continue to be “penalised” by paying higher premiums than those in England and Wales.
He said: “We are at a crunch point with only seven weeks before we know whether or not those of our communities which are at high risk of flooding are covered by insurance and whether they are still to be penalised.”
Scottish ministers are not part of these negotiations as regulation of financial services is reserved to Westminster. An independent Scotland could negotiate its own deal, according to Mr Wheelhouse.
In the meantime, Westminster must strike a new deal that maintains cover on riskier Scottish homes at a price which reflects the generally lower risk of flooding in Scotland, he said.
“Although responsibility for managing flood risk is devolved to Scotland, the responsibility for financial services is a reserved matter. We are therefore reliant on the UK government to reach an agreement with the ABI [Association of British Insurers] that will ensure the availability of affordable insurance after July,” Mr Wheelhouse said.
“It is important that any agreement reached with the ABI meets the needs of Scottish policyholders. If Scotland was independent, we would be better placed to directly negotiate a deal with ABI which is in Scotland’s best interests.
“In the meantime, we will have to continue to make representations on this issue to the UK government to achieve the best solution possible for Scotland with the circumstances that we face.
“While ABI regards the Scottish Government as a stakeholder, we do not directly take part in those negotiations.”
Mr Brodie, who has considered the matter as part of Holyrood’s public petitions committee, said: “This is not a them-and-us debate. There is, however, an anomaly where there is an unfairness, an inequity, where there is a cross-subsidy which relies on those families in Scotland who are insured against high flood risk subsidising, through a higher premium, the higher risk of flooding down south.
“ABI UK-wide figures have indicated the amount of cross-subsidy could be as much £430 per household by those not in a significant risk zone to those householders that are.”