Homeowners have sinking feeling

Flood insurance uncertainty gives businesses and homeowners sinking feeling; Businesses and homeowners seeking flood insurance could face greater uncertainty and prohibitively expensive insurance premiums in just four months’ time, experts will warn today.

The British Property Federation has called for urgent action to create a new settlement between Government and insurers, warning that the end of an agreement that guarantees near universal provision of flood cover could leave around 200,000 homes in high flood risk areas uninsurable and leave homeowners and thousands of businesses facing unaffordable bills.

The existing ABI/Government Statement of Principles between Government and the Association of British Insurers is due to end in June 2013, without any sign of a suitable alternative. The BPF said that the uncertain future of flood insurance will hit businesses and homeowners from July 2012 as insurance cover starts to be renewed that covers the period that includes June 2013.

Speaking ahead of a joint BPF/Peter Brett Associates summit held today, Liz Peace, chief executive of the British Property Federation, said: “This is a huge issue that is not getting the focus it needs, and time is running out. Its impact will be felt not only by our industry, but also banks and mortgage lenders. Uninsurable property may be difficult to sell; banks and mortgage lenders may not wish to lend on properties in flood risk areas. Bank covenants and lease obligations may not be met, making it easier to prematurely end them.”

Nick Starling, Director of General Insurance at ABI, will tell delegates: “Insurers are determined that flood insurance remains as widely available and as competitively priced as possible after the current Statement of Principles agreement with the Government ends in June next year. This can only happen if the Government agrees with the industry a new, long-term and sustainable flood insurance model – and the need for that agreement is urgent. The current agreement is well past its best-by date as it distorts the market for both consumers and insurers. This is why we need a new approach, based on some form of pooling arrangement, to ensure that flood cover remains available to those at higher risk”

Ben Mitchell, Partner at Peter Brett Associates, will say: “The issue of flood risk is never far from the headlines particularly in the light of the potential impact of climate change on increased flood flows and rising sea levels. With the advent of future changes in insurance cover and austerity measures in the government funding of flood defence, it is important now to understand the current risks to which property can be exposed, how such risks can change in the future and what options are available to mitigate them.”

Jackie Newstead, Partner at Hogan Lovells, will say: “There is still a widely held assumption that insurance will be available for flood risk, but with insurers being increasingly reluctant to insure high risk locations, we need to consider the implications for our transactions if it is no longer available. It may result in some transactions not proceeding and in other cases parties being exposed to claims for being in breach of their obligations.”

Bill Gloyn, chairman of the BPF insurance committee and partner European Real Estate of insurance brokers JLT, said: “Since the disastrous floods of 2007, this issue has been high on the BPF’s agenda. It was clear that, without adequate flood defence investment, the insurance market would pull out of insuring high flood risk areas. Since then the BPF has campaigned for adequate funds to be provided. It also expressed concerns over the effectiveness of the new partnership funding arrangements put in place by DEFRA from this April. Despite having some four years to address the issue, it is very disappointing that neither government or the insurance market have progressed beyond rhetoric and platitudes. Time is running out fast and tens of thousands of property owners could soon find themselves without flood insurance and with no viable alternative in sight”

ENDS 20 March 2012 The BPF/Peter Brett Associates summit, Flooding: will the property industry be left high and dry will be held from 8:00 – 10:15, Tuesday 20 March, Hogan Lovells, Atlantic House, London

Paul Sweeney, Media Officer, 020 7802 0113 / 07841 732 194.

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