[ Insurers step up flood cover warning ]

Half a million properties will be uninsurable while many owners of new homes will find it increasingly difficult to obtain cover unless there is better protection against flooding, insurers will warn this week. The Association of British Insurers will caution that widespread and affordable insurance will become history unless the government develops a long-term strategy for managing flood risk.

The ABI is expected to say insurers can no longer commit to cover the 517,000 properties the Environment Agency has identified as being at a high risk of flooding unless there is better protection against deluges. Insurers are already considering excluding new homes and some businesses from an industry agreement to provide flood insurance.

Discussions have begun between the government and insurers over a statement of principles, whereby the industry agrees to cover existing customers – homeowners and small businesses – in return for adequate investment in flood defences. Ideas tabled by insurers include the exclusion of new homes from the agreement and limiting how far it would cover businesses.

People familiar with the negotiations said some new builds should still be able to obtain insurance against flooding, but they would be excluded from the industry agreement. Under the existing agreement, even if a property is newly built homeowners would be covered by the statement of principles if they were already customers of an insurer.

Limiting the agreement’s application to new homes would be a blow to the government, which plans to build 3m homes by 2020. According to the ABI, 1m of these will be on flood plains. The ABI has warned that more new homes will be “unsaleable, uninsurable and uninhabitable” unless stronger planning controls are introduced to prevent new developments being built in areas of high flood risk.

Originally published 16 June 2008 - www.ft.com