More than 200,000 homes in England and Wales could go uninsured once a pact between the nation’s flood insurers and government comes to an end in 2013. The Association of British Insurers (ABI) has warned that these homes would have profound difficulty in attaining new flood insurance policies once the agreement comes to a close. The ABI has been examining data provided by the UK’s Environment Agency regarding the potential for severe floods in both regions of the country.
The issue has highlighted a major problem in the UK’s insurance industry. Once the agreement between insurers and the government ends and the 200,000 homes lose their insurance coverage, insurers may look to cancel policies on up to 5 million more homes throughout the country. Each of these properties is in dangerous territory, according to the Environment Agency’s flood data. These high risk homes present a significant financial risk for insurers as they will almost certainly have to pay for damages at some point during the length of a homeowner’s policy.
Once the agreement comes to an end, there is likely to be a fall in property value for homes that are in flood-prone areas. This does not bode well for the 5 million homes currently residing in such areas. There may be some good news associated with the matter, however. Once the agreement ends, building projects in flood-prone areas will be allowed to commence. Flood insurance presents a number of economic penalties for these kinds of projects and keeps land developers from building new homes and other structures. Without insurance, there is nothing keeping developers from pursuing new projects that could generate more jobs.
