Flooding can have a shattering impact on homes and families. This was evidently shown by the terrible floods which hit several parts of England and Wales in 2007 and again in Cumbria in 2009.
According to Environment Agency records, over 5 million people live and work in properties that are at risk of being flooded, with an as yet unknown number of commercial properties also at risk of surface flooding.
UK commercial property holders are on red alert after it was claimed the end of the UK Government’s flood insurance agreement could leave property worth over £200 billion uninsured.
The Government’s statement of principles (a gentleman’s agreement between the Government and the insurance industry) on insuring properties at risk of flooding is due to end on 30 June 2013, with the cost of flood insurance set to rise hugely. According to property search firm SearchFlow, one-in-four UK properties are at risk of flooding, meaning up to £214 billion worth of property could be left uninsured.
Commercial property owners are said to find it challenging to insure their premises for businesses from this summer 2012 onwards, with many insurers reluctant to provide policies that will expire beyond the Government’s principles agreement.
It is a warning for property owners that uninsured properties could leave them in breach of their mortgage contract as well as making properties tougher to sell or re-mortgage and reducing their overall value.
The Association of British Insurers (ABI) estimates the horrifying floods of 2007 cost more than £3 billion in repairs, and that the average cost for the repair of a flooded property is over £30,000. The Environment Agency at present spends £300 million per year on flood defences, but ABI reports that 43% of defences are in fair, poor or very poor condition.
As stated by Know Your Flood Risk UK, many UK insurers are already trying to free themselves of properties at significant risk of flooding, with many property owners unable to secure policies with excesses below £20,000.
Business development director at SearchFlow, Richard Hinton said: “The end of the principles agreement between the Association of British Insurers and the government could make flooding a hugely contentious issue during the conveyancing process when professional conveyances have to consider the potential risks a property faces.”
He explained: “Although buyers will be able to obtain flood insurance for the next few months, the long term prospects of properties at risk of flooding are potentially bleak especially for buyers purchasing in high risk flood areas. The possibility of very high premiums, significant reductions in value, less access to mortgage finance, even action taken by the mortgage lender due to breach of the mortgage agreement, is high.”
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