My Lords, I thank the Minister for his introduction to this statutory instrument, which seems fairly straightforward. However, I have a number of questions to ask him, if he is able to answer.
The Flood Re scheme was set up as part of the Water Bill in 2014 after the horrific flooding we witnessed during that winter. It was to ensure that, for those properties whose owners would find it almost impossible to gain flood insurance cover on the open market, the owners would not be left with no redress. The fund was to be paid for by a levy on all insurance companies, so spreading the load. The figure at that time was £180 million, as the Minister said; as a result of this statutory instrument, the figure is being reduced to £135 million.
The Adaptation Sub-Committee of the Climate Change Committee, chaired by the noble Baroness, Lady Brown of Cambridge, anticipates that flooding is likely to increase rather than decrease. In that case, how can the Government be sure that reducing the Flood Re fund by £45 million will not have a negative impact on those who cannot get insurance on the open market? Surely the fund should be monitored at the very least, or increase in anticipation of future demands on it.
The Explanatory Memorandum is clear that these regulations designate a new FR scheme. Given that the existing flood reinsurance scheme is working well, why is it necessary to have a new one? Apart from the difference in the sum involved, in what way will the new scheme be different from the existing FR scheme?
Paragraph 7.4 of the Explanatory Memorandum states that the liability limit will be reviewed
“every three years instead of every five.”
That is fine. The liability limit was £2.1 billion in 2016, with increases in line with the consumer prices index. Can the Minister say what the liability limit is currently, in 2022? It is important to review the limit but it has to be done in conjunction with the risk profile, as identified by climate change professionals, not just what Defra officials think might happen.
Paragraph 7.5 of the EM states that the surplus funds on the wind-up of the existing scheme will return to the Government. Can the Minister say why this surplus is not being transferred into the new scheme? This seems to me to be a mistake. If the insurance companies are paying a levy towards Flood Re, surely they should be the ones to reap the benefit of any surplus in the existing fund. Paragraph 12.3 refers to the lack of an impact assessment, as there is a negligible impact on businesses. If the surplus in the existing fund were transferred back to the insurers, it would have no impact at all on business. The Government are attempting to have their cake and eat it.
The new scheme will allow insurers on a voluntary basis to make payments of up to £10,000 for resilience repair—build back better—over and above the cost of like-for-like reinstatement of actual flood damage. My recollection is that this resilience repair element was part of the original commitment of Flood Re. Can the Minister say whether this was ever implemented from the start? If not, why not? Resilience is a vital element of this scheme.
I cannot see any reason why a new fund has to be set up if the existing one is operating well and has surplus funds in it. I am sorry to say that I feel something of a sleight of hand is going on here; at best, there is a distinct lack of transparency. Given the view of the Adaptation Sub-Committee of the Climate Change Committee that the incidence of flooding is likely to increase in future, I feel the reduction in the levy pot by £45 million is premature. Can the Minister reassure us that, for those who have access to the Flood Re fund, it will be there when they need it?