Landlords could face flood risk insurance issues

01 February 2012

Written by Jenny Barrett

Properties at risk of flooding may become harder to insure and landlords could soon face taking on higher insurance premiums as a result.

The Association of British Insurers (ABI) has warned that hundreds of thousands of homes across the UK could become uninsurable if they are at risk of flooding.

An agreement between the Government and insurers over the amount that can be charged to those living in flood-risk areas will soon be coming to an end.

The pact between the Department for Environment, Food and Rural Affairs (DEFRA) and insurers, which is known as the Statement of Principles, guarantees that existing cover for businesses and households at risk of flooding ends in 2013.

The ABI is currently refusing to renew the Statement of Principles, putting 200,000 houses at risk of becoming uninsurable. According to the AA, 5.2 million families are estimated to be at risk from flooding.

Home buildings insurance across the UK increased by an average of 9.5 per cent in the last year and contents cover has increased by 11.2 per cent over the same period.

Simon Douglas, director of AA Insurance, said; "Flood protection is a national priority, yet many people in flood-prone areas may find their homes difficult to insure from later this year.”

This could hinder landlord finances and eat into the returns on their properties. Whilst tenant demand remains high, landlords could be forced to push up prices to cover the additional insurance costs.

"Some insurers are telling us that flood-prone homeowners might not be able to renew their cover later this year, because their new policy will extend beyond 1st July 2013: with all the implications for property value and mortgage availability that this implies,” continued Mr. Douglas.

The ABI wants the risk of the most vulnerable properties to be shared with the government.