In 2009, the Government and the Association of British Insurers entered into an agreement, the Statement of Principles on the Provision of Flood Insurance, which committed home insurance providers to making flood insurance as widely available as possible. This agreement expires in June 2013.
When the agreement was drawn up, the understanding was that the Government would fund significant improvements to flood defences in high-risk areas. However, this work has proceeded much more slowly than was anticipated. The result is that hundreds of thousands of buildings will be potentially uninsurable against flood damage when the agreement comes to an end, as opposed to the very small number of ‘problem cases’ that had been expected to remain.
The inability to insure against the risk of flood will pose significant problems for owners and occupiers as well as for prospective vendors or lessors of such properties. Securing mortgage funding for property purchases in high-risk areas will be impaired and some existing mortgage holders may be pushed into default on their obligations to their lenders to keep their properties insured against flood risk.
Owners and occupiers of properties in flood risk areas should consider the potential implications for them should the agreement not be renewed.