Recent figures quote a staggering 1,700,000 homes and 130,000 commercial properties as being at risk from river or coastal flooding. This equates at current values to a total of over £200 billion. Currently, all properties are insurable at reasonable rates because of the Statement of Principles, agreed in July 2008, following several years of disastrous flooding in almost every county. The cost to the insurance industry was enormous and some homes were deemed to be uninsurable, due to the high premiums that would need to be levied to make the risk tenable. This would in its turn have made them unmortgageable, with appalling knock on effects for the housing market.
The Statement of Principles essentially involved an agreement from the insurers that they would continue to insure existing customers in high risk areas, as long as plans were in place to reduce the flood risk within five years. This agreement runs out in 2013 with potentially disastrous results for many who live on flood plains or on the coast where defences against the sea are vulnerable.
Despite a current annual spend by the government of in excess of £800 million pounds on flood defences, there is still an annual claim from all insured parties of around £1.4 million. This is damage directly attributable to flooding and no amount of preparation can completely wipe out the risk. Flash flooding in some areas continues to be a problem, as much flooding in recent years has been caused by building on land formerly essential for water management. This is not a problem which can be solved in a short timescale and meanwhile 2013 is approaching fast.
Michael Portman, managing director of LetRisks said recently, ‘Flood risk is a particular problem for the UK. The two primary causes are climate change, resulting in increased severity and intensity of rainfall, and new developments on floodplains, which are themselves at risk of flooding, and which increase the risk of flooding downstream. The effects of flooding and managing flood risk cost the UK around £2.2 billion each year.’ In regard to landlords owning property in areas of high flood risk, he added, ‘This is a very worrying time for landlords with properties at risk. The government has a responsibility to help protect properties by investing in flood defences and let’s hope the Housing Minister makes the right decision later this year.’
In many countries, governments offer permanent help to communities which are at risk of flooding, so that they can insure their properties at an economic rate. Without affordable insurance – and this in particular means insurance with a reasonable excess – communities will quite literally disappear, leaving ghost towns of unmortgageable, uninsurable properties. This is not acceptable from a personal, financial or practical standpoint – with housing shortages still an issue in some areas, having housing standing empty is not good sense in any way.
The Association of British Insurers are adamant that their members will be trying their best to provide reasonably priced insurance for homes in high flood risk areas, but warn that this will be difficult to achieve without government aid. Some quotes of excesses in the region of £20,000 have been suggested, which some mortgage providers may deem unacceptable. Flood defence work must be considered a priority in areas with a higher than usual risk of flooding, especially as long term forecasts do not seem to be promising a dry summer.