Falkirk East MSP Angus MacDonald has expressed his concern that households in Grangemouth, Skinflats, Blackness and other areas of his constituency could be subsidising flood insurance on properties elsewhere in the UK by as much as £430 per home a year.


Mr MacDonald believes that when flood risk management is dealt with separately in Scotland, and with substantial investment in areas like Grangemouth, Skinflats and Blackness to reduce risk, then the different priority given to flood risk management should clearly be recognised.


The issue was considered by Mr MacDonald in his capacity as a member of the Scottish Parliament’s Public Petitions Committee during a Parliamentary debate where there was cross-party concern that even when the overall flood risk is at a much lower level in Scotland than in England the cross-subsidy of insurance premiums means households are still heavily penalised.


The Scottish Government has called on UK ministers to strike a new deal with insurers to reflect the lower risk of flooding in Scotland, which continues to reduce with schemes such as those completed in Lhanbryde, Forres and Rothes and the new schemes being constructed in Elgin and for the River Findhorn. Work is ongoing to create flood defences for Grangemouth, with costs currently estimated at £100 million.


Insurers estimate that around one in four households in England are at risk of flooding (23.1%), against around one in 20 in Scotland (4.5%).


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. But insurers are refusing to extend the deal, insisting that it distorts the market and stalls the development of flood defences.


Scottish ministers are not part of these negotiations as regulation of financial services is reserved to Westminster.


Speaking after he took part in The Scottish Parliament Flood Insurance Debate, Mr MacDonald said:

“Of the 6,000 low-lying homes around the Firth of Forth at risk of flooding, around one third of these are within my constituency, so the issue is very real for many of my constituents.



"The responsibility for managing flood risk is devolved to Scotland, however 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.


“When the Scottish Government and Local Authorities like Falkirk Council are investing significant amounts of public money in reducing flood risk through major flood prevention schemes for Grangemouth, an extension to the Forth & Clyde Canal taking excess water away from the area, the Skinflats Tidal Exchange Project which protects nearby properties with a  new flood embankment and of Grangemouth and Blackness benefiting from the new coastal flood warning service, it is reasonable to expect that insurers should reflect that investment priority and that it should also reduce insurance costs.



“I suspect that my constituents will not appreciate that their premiums may still not fully reflect the reduced risk to their property.



“Estimates suggest Scottish householders are paying for property development in southeast England by contributing to a £200-million-a-year “stealth subsidy” for insuring buildings in areas at high risk of flooding, in order to keep insurance costs down for thousands of homeowners on English flood plains, householders in Scotland are being charged higher premiums.



“Sadly there have been precedents in excessive hikes in insurance premiums and experts suggest Scots in high risk areas could expect insurance costs to rise by as much as 70%.



“In essence insurance companies are ignoring the budget priority given by the Scottish Government to reduce flood risk in Scotland. It is therefore important that any agreement reached with the ABI meets the needs of Scottish policyholders.


“If Scotland was independent, we would be far better placed to directly negotiate a deal with the 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 the Scottish Government is regarded as a stakeholder, we do not have the opportunity to directly take part in those negotiations.”


Copyright © Angus MacDonald MSP 2017

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