11:03 AM, 13th December 2010, About 11 years ago
Millions of homeowners and businesses may find buying buildings and contents insurance harder to obtain as a result of cuts to government spending on flood protection.
Government figures show about 5.2 million homes are at risk from flooding – and that’s about 25% of the total homes in the UK.
The worry is that spending cuts have left a massive hole in flood protection budgets that will leave homes and businesses with little hope of arranging insurance cover.
This will have a massive impact on the housing market as mortgage lenders stipulate a property must have buildings insurance as part of the loan offer.
The current deal between the government and insurers to offer cover to at risk homes runs out in 2013. Insurance providers will only continue to offer buildings insurance if the government funds a programme of flood defence projects.
Homes at risk of losing buildings insurance
Even then, insurance will only cover homes and businesses that present a less than 1 in 75 risk of flooding, leaving millions of properties uninsured or struggling to find cheap cover even if anti-flooding work is carried out.
Chancellor George Osborne has earmarked £500 million a year for flood defences from 2011 to 2015.
This is a cut of £216 million and much less than the Environment Agency’s recommended total of £1 billion a year by 2035 to maintain the number of houses currently protected.
Bill Gloyn, a partner at insurance brokers Jardine Lloyd Thompson and Chair of the British Property Federation’s Insurance Committee said: “Flooding is a catastrophic risk. If cover is not available – and that is already the case in some areas of the UK – the consequences are almost too frightening to contemplate.
The widespread breaches of contract will lead to chaos and a potential collapse of the property market – both commercial and residential. “Without insurance there is no mortgage. Without mortgages, there is no property market.”
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