19th January 2012
More than 200,000 homeowners face flood insurance problems
Homeowners who live in flood-risk areas could face repossession and be left uninsured because the agreement protecting them is not going to be renewed.
The government's statement of principles on insuring flood-risk properties is due to expire in June 2013, and currently there is no replacement deal in place, leaving an estimated £214 billion worth of property uninsured.
From this summer onwards, property owners could find themselves unable to insure their homes as insurers become unwilling to offer policies which expire after the agreement.
Richard Hinton, business development director at SearchFlow, said: "The end of the principles agreement between the Association of British Insurers (ABI) and the government could make flooding a hugely contentious issue during the conveyancing process when professional conveyancers have to consider the potential risks a property faces."
It will be particularly damaging for buyers purchasing in high-risk areas, as they may face very high premiums or excesses (up to £15,000), a reduction in value and less access to mortgage finance.
One of the reasons that insurers are currently reluctant to expose themselves to flood risk is the fact that UK flood defences are not in satisfactory condition and do not receive adequate funding.
Research shows that the Environmental Agency currently spends £300 million per year on flood defences, but reports that 43 per cent are in fair, poor or very poor condition.
Furthermore, repairing a flood damaged property typically costs £30,000.
Mr Hinton said that an extension to the current agreement between the ABI and the government was "unlikely", as it would mean an agreement to improving flood defences in high-risk areas.
"This is worrying news for those buying in areas with high flood risk.
"Given that one in four properties in the UK faces a significant risk of flooding, conveyancers everywhere must take notice of the potentially huge dangers a future dearth of flooding insurance may pose," he added
Posted by Victor Onuohae
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