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The Ayatollah Buggeri

Telegraph - Insurers Demand More Info From Government On Flood Defences

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Telegraph article.

The gist: insurers fear that information about the state of flood defences provided to them by the government for the purpose of assessing relevant risk levels might not be reliable, as in reality a lot of flood defence infrastructure isn't in as good a condition as the government claims it is.

Alan Gairns, head of property insurance at Royal & Sun Alliance, who also leads negotiations with the Government on flooding on behalf of the Association of British Insurers, said: "We spent time building a flood map of the country… to be able to cover as many people as possible by identifying flood risks at an individual, house-by-house level. That underpins how we do business now.

"In the map, we've built in the known existing flood defences, the standard they are and level of protection they're giving. Given what the National Audit Office said, it appears that we've now got defences that are not performing to the level that we think they are. If defences are in need of maintenance they may be providing less protection than our information suggests. So we could have exposures in there that we might not want to have.

I remember that, after the York floods of November 2000, insurers paid up without arguing, but warned that they would not continue to offer insurance to the most vulnerable properties if flood defences were not upgraded. Some work was done on the York infrastructure, and thankfully the river has never gone as high as it did in 2000 since (although it's come within a couple of feet of the top of the defences between Lendal and Scarborough bridges on one or two occasions).

However, I thought it significant at the time that insurers were starting to point a gun at the government's head over the issue; and it looks like the last fortnight's £1.5bn bill has got them thinking about it again.

I'd speculate that if the insurance industry really does turn round and refuse to offer building and/or contents cover to large swathes of cities like Sheffield, Doncaster, York and Hull, it's going to cause localised HPCs in the risky areas, and HPI beyond all imagination in the safer ones, as the supply of 'good' housing will be squeezed even further. Properties in the upper stories of blocks of flats would do well, too, I guess. Will the government sit back and let this happen? I can see three options.

1. Sit back and let large areas of Labour stronghold constituencies become uninsurable (not likely).

2. Cough up for upgrading the flood defences.

3. Offer a government-based state insurance scheme for properties which the private sector won't touch.

4. Force the private sector to insure risky properties through regulation (paid for by higher premiums on safer ones).

My guess is that if push comes to shove, they'll opt for 4.

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