Flood insurance

The twin effects of climate change and development on flood plains have become increasingly problematical for home owners and property insurers. Greater amounts of rainfall generally and more and more exceptional weather incidents have resulted in the insurance industry facing ever-rising flood-related insurance claims. In the UK, summer 2012 was the wettest for a century, in June alone flood claims were running at around £17 million per day, while in November 2019, floods in Yorkshire and Derbyshire caused widespread misery and damage to property.

All this means that properties in flood-prone areas are increasingly expensive to insure. Some are completely uninsurable.

Since 2000, in response to the increasing risk of flood damage to vulnerable properties, there has been an agreement in place between Government and the insurance industry (represented by the Association of British Insurers) whereby insurers would continue to offer insurance cover on vulnerable properties in return for guaranteed levels of public spending on flood defences.

However, this agreement ended in 2013 and was superceded by a new agreement which took effect in 2015, under which all homeowners, not just those affected by flooding, pay a fixed annual sum to help cover the cost of flood damage. This helps reduce insurance costs of those directly affected. In fact, homeowners have, for some time, been paying this amount, but the arrangement is now being formalised.

Insurers may continue to offer renewal terms on vulnerable properties, although the premiums will still be high when compared to low-risk properties. The premium differential for equivalent properties in high and low risk areas can be as much as four times.

If a property is in a high flood-risk area, there is no guarantee that insurance will either be available, or available at reasonable cost and the new agreement does not change these facts. Information on flood risk is available via the Environment Agency.