Press release

INSURANCE NIGHTMARE OVER GOVERNMENT DITHERING ON FLOOD PREVENTION

Date

19th June 2009

Description

The property industry is backing calls for the government to double flood prevention spending with news that one in six homes is at risk as rainfall across the country increases with many potentially facing the insurance nightmare of affordable insurance cover being withdrawn.

Spending must increase from £570m a year to £1bn per year to avoid around £4bn of yearly damage from flooding, the Environment Agency today said.

The British Property Federation (BPF), which represents developers, investors and agents, believes that the government must act now and that not doing so could not only impact new development but also insurance for existing homes and businesses. There is a very real possibility of affordable cover being withdrawn in areas of high flood risk.

No insurance cover would mean no mortgages, as valid property insurance is one of the terms set out by lenders.

Former head of property at insurance giant Aon, Bill Gloyn, who chairs the BPF’s insurance group, said:

“These figures are a wake up call to the Government to increase the resources they dedicate to fighting the risk of flooding. This will reduce the chances, and severity, or future flood events but also provide much needed confidence to the insurance industry to continue to provide flood cover for households and businesses”.

Ian Fletcher, BPF residential director, said:

“There are two significant Government consultations currently out for views on the subject of flooding, none of which give any solid guarantees of the levels of Government funding that will be provided to manage the risks of flooding in the future.

"Government needs to take stock of the figures released today, which illustrate what an absolute false economy it would be to skimp on flood spending, when the financial implications of flood events will likely double to £4bn / yr by 2035 if based on Environment Agency estimates. This is a huge loss that will ultimately be brought to bear on businesses, insurers and property owners.”

NOTES FOR EDITORS:

The new reports from the Environment Agency today show that 1 in 6 homes in England are at risk of flooding and that investment in the building and maintaining of flood defences will need to almost double to £1bn a year by 2035. More than five million people also currently live and work in 2.4 million properties at risk from rivers or the sea - 490,000 of which have a significant chance of flooding

The Environment Agency’s strategy estimates that the annual cost of damage to residential and commercial property from flooding in England, as well as the cost of further disruption, damage to infrastructure and loss of business, could rise from £2.5 billion to £4 billion by 2035 unless funding for defences is increased.

Under the current Statement of Principles agreement between the insurance industry and the government, the insurance industry has guaranteed to provide affordable flood cover to households and small businesses if the properties are located within an area of 1 in 75 flood risk or more. This commitment is due to expire in 2013, and does not currently cover new properties constructed later than 1st January 2009.

The current Government consultations out for views are the Thames Estuary 2100 strategy (TE2100) and Draft Floods and Water Bill.

The British Property Federation has been wishing for Government to encourage a portfolio of measures to mitigate the risk of flooding including community level flood defences, property level flood mitigation measures and improved education on how to reduce the risk of flooding.