AA warns on flood homes

AA director of Insurance, Simon Douglas, has warned Environment secretary Caroline Spelman that cuts to flood defence spending would see thousands of home becoming uninsurable, preventing them from getting mortgages.

Douglas said: “Millions of people are at risk of inundation from overflowing rivers, coasts and estuaries during extremes of weather and that risk is increasing all the time.

“The Environment Secretary is expected to say today (Thursday 16th September) that the UK must drastically cut its greenhouse gas emissions and that we must prepare for the best and worst cases that a changing climate will entail.

“Despite that, many leading commentators in the insurance industry are concerned that spending on flood defences, and supporting local authorities to help reduce the risk of flash flooding, should be significantly increased, not cut.”

Statement of Principles

The Association of British Insurers’ Statement of Principles, agreeing to maintain insurance cover for flood-prone homes is conditional on continuing investment in flood defence measures by the government. The statement expires in 2013 anyway the ABI says it will not be renewed.

“If spending isn’t maintained, it will compromise the Statement of Principles, which could see many homes become uninsurable,” Douglas says, adding that the Environment Agency has called for flood defence spending to be doubled over the next 25 years.

Premium rises

“Historically, both home buildings and contents insurance premiums have remained relatively static, according to the AA’s benchmark British Insurance Premium Index, but are showing signs of upward movement.

“Buildings insurance has on average risen by about 13% over the past year while the cost of contents cover has risen by only 6% over the same period.

“Insurers are concerned about future flood and storm damage claims which are likely to become more frequent and more severe as the climate warms and they will need to increase reserves to be able to pay out for large numbers of future claims.

Fussy

“If investment in defences - and that includes ensuring storm drains are kept clear and are improved to remove surface water - is not maintained, insurers will become increasingly fussy about who they insure and premiums will inevitably increase.”