Due to the recent severe weather conditions, the issue of flooding has once again hit the headlines.
It is not only properties near to rivers or the sea that are at risk – surface water, overflowing sewers and groundwater are also a factor.
Flood risk raises various issues for owners and occupiers – potential physical damage, the availability and cost of insurance and also the knock-on effects on the ability to mortgage and on marketability.
Concerns have been raised that some properties in high risk areas may become uninsurable for flood damage, or only insurable at very high premiums. A new regime to address this – Flood Re – is envisaged and is due to be introduced in summer 2015. It will not, however, apply to commercial property.
Under the new regime, flood cover will remain widely available to homeowners at high flood risk, with the flood element of the premium capped according to the Council Tax band of the property (properties in Band H, however, will not be covered). Homes built after 1 January 2009 will also be excluded – so as not to encourage unwise construction in flood risk areas.
In the meantime, the insurance industry has agreed to continue to offer cover (for pre-2009 properties) to existing domestic and small business customers where flood risk is not ‘significant’, or where the Government has announced plans to reduce flood risk below ’significant’ within five years. The premium and excess will reflect the risk.
In addition to checking their insurance arrangements (both buildings and contents and business interruption), businesses also should review the terms of their leases to ensure that they are suitably covered. If acquiring property or premises in an area at risk, careful consideration should be given to thorough due diligence and the availability and cost of insurance.