ABI Says 200,000 UK Homes May Have No Flood Insurance From 2014

About 200,000 homes across Britain face increasing risk of flooding and may no longer be able to get insurance cover from 2014, the Association of British Insurers said Tuesday.

The warning comes amid concerns that the U.K. government may not have the funds to build all the needed flood-control infrastructure despite a continuing rise in sea and water levels due to global warming.

This raises the prospect that many homes in the country would have to spend money on flood defences and that insurance premiums could become too expensive.

A so-called "Statement of Principles" signed between the government and the ABI in 2000 guaranteed that U.K. insurers would cover homes in high-risk areas where flood defences were planned to be completed in five years.

"This (agreement) was renewed in 2008 but it will not be renewed when it comes to end in 2013," ABI Director of General Insurance Nick Starling told a property-insurance conference.

"We've kept our side of the bargain. Has government? Well, up to a point," Starling said. He said that the government has improved its data and planning processes but the "good spending" it has done on flood defences "has slowed down."

"We calculate there's about 200,000 homes in the U.K. which, if there was a completely free market in flood insurance, would either be unaffordable to insure or insurance will simply not be available," he said.

British Property Federation Chief Executive Liz Peace said: "This is a huge issue that is not getting the focus it needs and time is running out. Its impact will be felt not only by our industry, but also by banks and mortgage lenders."

"Uninsurable property may be difficult to sell. Banks and mortgage lenders may not wish to lend on properties in flood risk areas. Bank covenants and lease obligations may not be met, making it easier to prematurely end them," Peace said.

Rachael Hill, strategic development and flood risk manager at the government's Environment Agency, told the conference: "There is never going to be enough money to protect everybody, everywhere all the time."

"The money we have during this current spending review is in excess of GBP2 billion... Flood risk management is not only about building walls. It is about the advise that we give very effectively to local planning authorities," Hill said.

"So there will always be a shortfall of money. Whether (the money) will come from a public purse, a third party or private persons in the communities, we've got to understand flooding, flood risk in the future and learn to live with that in many cases," she said.

-By Vladimir Guevarra, Dow Jones Newswires; [phone], [e-mail]