Expert welcomes affordable flood insurance scheme for small businesses

The new scheme has been developed by the British Insurance Brokers Association (BIBA). It will involve four insurers who together will closely analyse the risks that each business faces before underwriting the "vast majority" of policies, according to the Financial Times.

Insurance law expert Manoj Vaghela of Pinsent Masons, the law firm behind Out-Law.com, welcomed the arrival of the new scheme.

"Affordable insurance will allow entrepreneurial small businesses to focus on innovation and business development rather than upon whether or not they are insured in the event of a flood," he said. "The small businesses of today are the multinationals of the future."

The scheme was developed in response to concerns that small businesses in flood risk areas find it difficult to obtain insurance. Around 50,000, or 6%, of small businesses at risk of flooding have been refused flood insurance cover, while around 25,000, or 3%, find flood insurance cover unaffordable, according to a survey by the Federation of Small Businesses (FSB) last winter.

Since April, most homeowners have been able to access guaranteed flood insurance through Flood Re, a government-backed reinsurance scheme funded by an industry levy. Small businesses, houses built since 2009 and buy-to-let properties insured by their landlords are, however, all excluded from the scheme.

The BIBA scheme does not feature government involvement or an industry levy, and will instead rely on risk-reflective pricing, according to the Financial Times. The insurance will cover property damage, business interruption and theft, and will allow customers to pay a higher premium in exchange for a lower excess, according to the Financial Times.