UK flood insurance initiative may be lacking foresight
The United Kingdom’s new flood insurance initiative, called Flood Re, may not adequately account for the risks that many properties face, according to a new study from the London School of Economics. The flood insurance initiative operates as a flood fund, creating a financial windfall for homeowners, the UK government, and the insurance industry. The fund is meant to mitigate the costs associated with flood disasters and represents several years’ worth of negotiation between the UK insurance industry and the government.
Flood Re may be underestimating risks of future floods
Flood Re assumes that some 500,000 homeowners in England and Wales are at risk of falling victim to floods. In order to account for the financial risks that such properties face, homeowners throughout England and Wales are requires to pay a particular tax, which provides the financial backing for the Flood Re initiative. According to the London School of Economics, the program is woefully underestimating the impact of climate change and how this phenomenon may impact homeowners.
Study suggests as many as 800,000 homes are in danger of flooding
The study from the London School of Economics suggests that as many as 800,000 properties in England and Wales could be at significant risk of flooding within this decade. Because Flood Re is operating under the assumption that only 500,000 properties are at significant risk, the study claims that the flood insurance initiative may be unable to meet its financial responsibilities in the near future. This could create a very problematic situation for homeowners in the UK.
UK agency begins reviewing study
The study has been submitted to the UK’s Department of Environment, Food, and Rural Affairs. The agency has opted not to issue a comment on the study until it has fully reviewed the findings. The agency is expected to publish its analysis in October of this year. Should the agency find appropriate cause, Flood Re may be undergoing changes in the future in order to ensure that flood insurance does not prove to be a hindrance for homeowners in risk-prone areas.
