New warnings over insurance problems for flood properties

Wednesday 1st February 2012

New warnings have been issued about properties at risk of flooding which could be both uninsurable and un-mortgageable within months.

It follows a damning report from a group of MPs into the state of Britain’s flood defences.

The Public Accounts Committee accused DEFRA (the Department for Environment, Food and Rural Affairs) of neglecting its duties, saying it did “not accept ultimate responsibility for managing the risk of floods”.

One-quarter of properties in the UK are at risk of flooding and yesterday the Association of British Insurers warned that up to 200,000 homes will face insurance problems.

It said that Boston, Skegness and the Vale of Clwyd were most at risk, followed by Folkestone and Hythe, Windsor and Runnymede, and Weybridge.

The ABI repeated warnings that a pact with DEFRA will end next year – which will hit home owners trying to renew insurance policies from the end of this June.

Insurers agreed to carry on insuring flood-prone properties on the basis that the Government would improve flood defences – which, says the ABI, has simply not happened.

The Public Affairs Committee accused DEFRA of not even being able to say how much it would cost to bolster Britain’s flood defences.
 
Uninsured properties could leave owners in breach of their mortgage contract, as well as making properties harder to sell or remortgage, and reducing their overall value. 

According to the campaign Know Your Flood Risk UK, which is attempting to get both home owners and estate agents to take the issue seriously, many UK insurers are already trying to rid themselves of properties at significant risk, and some property owners have been unable to secure policies with excesses below £20,000.
 
Richard Hinton, business development director at property information firm SearchFlow, said: “Although buyers will be able to obtain flood insurance for the next few months, the long-term prospects of properties at risk of flooding are potentially bleak.
 
“Especially for buyers purchasing in high-risk flood areas, the possibility of very high premiums, significant reductions in value, less access to mortgage finance – even action taken by the mortgage lender due to breach of the mortgage agreement – is high.”