Warning that Flood Re Insurance Scheme could cost £4.3 trillion in falling house prices

Flood warningsWith half the country already underwater, and more wet weather on the way, the floods are understandably dominating the headlines. To make matters worse the tentative agreement over the future of flood risk insurance is still far from watertight. In fact, a leading environmental surveyor has predicted that holes in the agreement could cause a £4.3 trillion fall in house values.

The warning comes from Philip Wilbourn, an expert in environmental risk, who thinks the Environment Agency haven’t got their sums right. Official figures estimate there are up to 6 million homes at risk of flooding, but Mr Wilbourn believes the actual figure could be closer to 10.9 million. He believes the government’s calculations are flawed because they do not factor-in all the mechanism of flooding, including: rising ground water in chalk areas and an increase in surface water.

Mr Wilbourn is urging the government to rethink the terms of the outline ‘Flood Re’ agreement which currently excludes: homes built after January 2009, properties in the highest Council Tax band and small businesses, and may also exclude leaseholders.

With more properties at risk of flooding, and many facing a real danger of being unable to find affordable insurance, there’s a risk of “setting up flood ghettos” where properties collapse in value. Mr Wilbourn argues that “If it’s uneconomic to buy insurance and, say, 20% of the housing stock don’t buy or can’t buy, the loss of value is £4.3 trillion.”

It’s a worrying prediction and one that isn’t being taken lightly in Westminster. Cross party MPs are asking the government to revise plans on the exclusion of an estimated 5 million properties from the Flood Re scheme. And with the rain continuing to deluge the country, the clamour is bound to get even louder.

What exactly is Flood Re?

Flood Re is a proposed ‘Flood Reinsurance’ scheme hammered out by the Association of British Insurers and the government to make sure that households in flood risk areas can get affordable insurance.

The insurance industry will pay £180 million a year into the scheme (funded by a £10.50 levy on all home insurance policies) and the government will meet remaining liability up to an estimated £2.5 billion. In return homeowners in flood prone areas will have the flood element of their insurance capped at £540 a year.

Quoteline Direct specialises in providing Flood Risk Insurance; find out more online or Tel: 0161 874 4171 to speak with a consultant.

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