Currently, an estimated one in six properties in the United kingdom is in an area which is regarded as being a flood risk. The Environmental Agency data on flood risk show that out of these, 500,000 properties are located in areas which are considered to be a considerable flood risk (anticipated to go up to over 800,000 by 2035). The two major causes for the increase in the areas regarded as a flood risk area are said to be climate change together with the pressure on land use (particularly in the South East) which means that more and more new estates are now being built on flood plains - which are regarded as a major flood risk.
Floods of 2007
Right after the horrendous floods in 2007, the government came to an agreement with Insurance Firms, through the auspices of the Association of British Insurers (‘ABI’), whereby the Insurance Firms agreed to carry on and insure properties in areas regarded to be flood risk areas at regular market rate premiums and not make any rises in the premiums until 2013. In exchange the government promised to invest in strengthening flood defences in those flood risk areas. This was called the ‘Statement of Principals’ and the intention was that the agreement could be renewed in 2013.
According to the ABI, the promised government investment in flood defences for flood risk areas has not materialised and in some cases the investment has been reduced. If the government carries on along the same road there is little or no chance that the Statement of Principals will be renewed.
What does this mean for Householders?
If the Statement of Principles isn't renewed by the ABI, around 200,000 homes which are in flood risk areas could become uninsurable within just two years’ time whilst other house owners will face very expensive insurance premiums for simply sharing the same post code as the flood risk areas.
An uninsurable property is a house that'll be very difficult if not impossible to sell - virtually no mortgage lender or bank will lend on it and if it can be sold, it's going to sell for a figure well below market value.
There are indicators that insurance providers are already off-loading problem properties in flood risk areas or raising the premiums and policy excesses. Even now, numerous Insurance Companies will not insure a property or home that is within 110 metres of water! The Property Or Home or the area doesn't have to have had a past history of flooding in order for there to be difficulty in getting buildings insurance - it merely has to have been regarded a flood risk area by the Environment Agency. An illustration is a home that's eighty years old and has a fishing lake about 100 metres away behind. Inspite of there previously being no record of that area ever flooding - 10% of insurers won't insure the house.
Currently there are people reporting that their house insurance has increased by two thirds due to it being within an area considered to be a flood risk area, plus they are expected to have excesses of around £15,000 - £20,000.00
Already people in certain areas are starting to find it hard to find affordable insurance cover for their properties and the situation is only going to get worse. This is expected to be one of the ‘unexploded bombs’ to hit the already beleaguered property market.