Press release

25 September 2008

Many of the one million homes in the UK to be built on floodplains by 2020 may be uninsurable against flooding, actuaries at the Actuarial Profession’s General Insurance (GIRO) Convention heard.

In his presentation to all conference delegates titled UK Floods, GIRO Flood Risk Working Party chairman Julian Lowe said approvals to build on floodplains meant many homeowners would face premiums they could not afford or difficulty in obtaining insurance.

Mr Lowe said: “Whilst the number of people at risk of flooding is likely to rise simply due to climatic changes, this will be exacerbated by increasing numbers of people living on floodplains.

“Ten per cent of all properties in England are located on floodplains and more than a million new homes are due to be built on floodplains by 2020,” he said.

“There will potentially be many new homes in England for which insurers are not prepared to provide cover.”

Flooding already costs the UK £3billion in an average year. Mr Lowe said insurers, local authorities and the wider community also needed to improve their approach and response to floods to better protect themselves. Steps needed to reduce the cost of flooding to residents and communities and create more accessible and accurate information include:

• Effective development control carried out to potentially prevent inappropriate development
• The use of flood-resilient building design
• The creation of areas of flood-compatible land use adjacent to rivers that can act as occasional flood storage
• Approved emergency preparedness.

He also highlighted aspects of the Association of British Insurers’ stance on insuring new homes in flood risk areas which are in urgent need of clarification, as well as suggesting improvements to how insurers determine ‘at risk’ properties, better information on flood risk for insurers and homeowners, more information on drying out properties for homeowners and a more cooperative approach to collecting and sharing flood risk information from insurers.

Although there may be problems in 2009 for new properties to obtain insurance in high flood risk areas, the GIRO Convention heard that this is certainly not the case for existing properties. A survey of household insurance premiums by the Working Party showed that it’s still possible to obtain cheap insurance in nearly all high risk flood areas in the UK.

Mr Lowe commented that: “Whilst insurers may complain about the lack of government spending on flood defences, most insurers still offer very cheap insurance in many high risk areas. As long as most insurers offer household insurance at far less than the economic cost in high risk flood areas, there will be very little incentive for government or homeowners to invest in flood defences.”

GIRO is being held from 23-26 September.

Enquiries: Tel. Fleur Morrison on 020 7632 1453 or email fleur.morrison@actuaries.org.uk

Notes to Editors

1. Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
2. Members of the Profession have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.
3. The Profession is governed jointly by the Faculty of Actuaries in Edinburgh and the Institute of Actuaries in London. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.
4. The Profession is available to provide expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.