Flood-risk families face home insurance heartache

Insurers have warned the future of the agreement – overhauled following the devastating floods of 2007 – to offer cover in flood-hit areas will be in doubt after it runs out in 2013 unless spending on defences keeps pace with growing threats.

Ministers are keen to protect spending on flood defences during negotiations on the Comprehensive Spending Review but are unlikely to be able to meet industry demands for increased investment.

The Environment Agency calculates funding will need to reach 1bn by 2035, nearly double recent spending. This has sparked calls for "imaginative" ways of finding extra cash and more private investment.

The Government hosted a flood forum last week, where the two sides agreed a "roadmap" towards 2013. However, there is real uncertainty over what will happen, the agency warning in a letter to Environment Secretary Caroline Spelman that cutting spending on defences "could see many homes become uninsurable" and threatening home owners ability to secure a mortgage.

The acting director-general of the Association of British Insurers (ABI), Maggie Craig, said: "With the flood risk set to worsen for many, all stakeholders must work to find a solution to help the growing number of people at risk. We must ensure that investment in our flood defences keeps pace with the flood threat."

Thirsk and Malton MP Anne McIntosh, chairman of the Commons Environment, Food and Rural Affairs Select Committee, attended last week's flood forum and said: "The insurance industry is seeking significant spending commitments from the Government of at least the promised 1bn to protect and defend those homes at most significant risk of flooding.

"Without this investment the Association of British Insurers feels it will be impossible to renegotiate the statement of principles in 2013."

The prospect of being uninsurable will be a major concern for people across swathes of Yorkshire whose homes were flooded in torrential weather in 2000 and 2007.

Hull City Council leader Carl Minns said: "I think there's going to be a tough couple of years, but I'm confident there will be some form of agreement. This Government will want to avoid getting into messy legislation and compulsion if at all possible.

"At the end of the day, insurance is based on risk and if you know there's an area that's going to get flooded every couple of years it's unfair on other policy holders to subsidise coming events."

Speaking at the conference meeting, Yorkshire Water chief executive Richard Flint said the funding gap could be bridged by private investment, while there have been calls for more imaginative planning solutions.

Mrs Spelman has made clear she will seek to protect spending on flood defences, axing some of the Department's quangos to save cash instead.

Following last week's summit – which included insurers, the National Flood Forum, the Environment Agency and local government – Environment Minister Richard Benyon said: "Government has a role to play in managing the overall risk to the nation, but we all, as individuals need to take greater responsibility for understanding our own flood risk and minimising it where we can."

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