Mortgages fear for flood-threat areas

HOMEOWNERS and businesses in flood-prone areas of South Yorkshire are at risk of being left without any insurance.

The insurance industry has confirmed it will not renew an agreement to maintain flood cover as standard in home insurance policies when it expires in 2013.

One senior Labour MP has warned the decision could prevent buyers in some areas from obtaining mortgages.

Following the devastating floods of 2007, the insurance industry agreed it would provide insurance to the "vast majority" of homes until 2013 as long as the Government continued to boost flood defences.

The agreement included a commitment to protect properties at "significant flood risk" provided there were plans to improve defences.

But a spokesman for the Association of British Insurers has now said the so-called Statement of Principles "has only ever been a stop gap measure".

He added: "The Statement of Principles will not be renewed in 2013. We are clear on that.

We are determined to work in partnership with the Government and all other interested bodies to see how best we can have a long term flood strategy in place."

The industry has complained the deal distorts the market because it provides no incentive for new insurance firms - who are not covered by the agreement - to offer flooding insurance.

The ABI spokesman added: "We would hope that come the end of the agreement there is going to be a competitive market for flood insurance."

A report published last month by the influential Commons environment select committee urged the Government to "urgently" thrash out a new agreement with the industry.

Anne McIntosh MP, chair of the committee, said the ABI was playing "hardball" with the Government.

Under the last government, spending on flood defences rose 33 per cent in the four years to 2010/11.

However, the coalition government cut flood-defence spending in the comprehensive spending review.

Labour's shadow environment secretary Mary Creagh said spending cuts "put at risk universal flood insurance for people and could leave some householders unable to find mortgages".

Environment minister Richard Benyon said: "I am committed to ensuring flood insurance remains widely available.

"Just last September, the Government and insurers agreed to continue to work on how flood cover could be provided to at-risk households beyond 2013.

"And despite the tough economic climate we have protected flood funding.

"We'll spend more than 2.1 billion on flood risk management over the next four years, giving extra protection to around 145,000 homes."

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