Talks between the Government and the Association of British Insurers (ABI) on replacing the agreement on flood insurance (which expired in July) have reached an impasse.

The plan is to establish Flood Re, a not for profit fund for around 200,000 homes in high risk flood areas and is designed to cover against floods up to those expected in a 1 in 200 year occurrence (six times worse than the floods seen in 2007). The ABI concern is that there could be problems if substantial flooding occurs in the early years before reserves have been built up and have asked the Government to provide a temporary overdraft facility. They have so far declined to do so.

If the dispute can be resolved, Flood Re should become operational in 2015 and in the meantime ABI members will voluntarily continue their commitment to existing customers under the old Statement of Principles agreement.