Bill Gloyn warns that cover might be withdrawn for homes in high-risk areas as floods hit north of England.
A senior Aon executive has warned that the government is sitting on an insurance “time bomb” following its slow response to the flooding last weekend.
Bill Gloyn, chairman of real estate Europe for Aon’s mergers and acquisitions group, said if the government did not improve flood defences, cover could be withdrawn for properties in high-risk areas when the insurance industry’s agreement on flood cover ends in five years.
The comments came as flooding affected parts of Yorkshire, Northumberland, Shropshire, Herefordshire and Worcestershire. Morpeth was badly hit, with an estimated 1,000 properties damaged in the Northumberland market town.
The ABI has said the cost of last weekend’s floods could run into tens of millions of pounds.
“Despite £3bn of claims following the floods of summer 2007 and the Pitt Review recommendations, the government has failed yet to state how it will strengthen flood defences, let alone take any action,” said Gloyn.
“Many of the recommendations are still on the table, to be considered in 2009. Now we’re seeing a replication of the damage from 14 months ago, with many areas affected for the second or third time within two years, but with no reassurance that even Pitt’s watered-down suggestions are being put into place.”
The Pitt Review called for the insurance industry to work with government to deliver a public education programme setting out the benefits of flood insurance.
The report also recommended that in flood-risk areas, insurance documents should include information on flood risk and steps that can be taken to mitigate risk.
Gloyn said: “In response to costly claims and lack of government action, insurers have now put a timeframe of five years on the once-ongoing statement of principles, which states their intent to maintain flood insurance protection as long as the government implements measures to maintain and improve flood defences.”
The revised statement, published in July 2008, anticipated that by 2013 the tensions between insurers and government on the provision of flood defences would have been resolved and there would be no need for a further agreement.
Gloyn said: “In practice, this worryingly means that insurance simply won’t be available for those high-risk properties that need it the most. It will be miraculous if the government turns this around following their recent inertia, but people need to know of its intentions to protect their homes and businesses. Without any clear idea, it may be necessary to take things into their own hands and implement protective measures themselves.”
Separately, in a report released this week by Lloyd’s, the corporation warned that insurance losses from coastal flooding in high-risk areas could double by 2030.
The research showed that, with an effective adaptation strategy, future losses could be reduced to below present-day levels with losses for high-risk properties reduced by as much as 70%.
Richard Ward, chief executive of Lloyd’s, said: “With over half the world’s population expected to live within 100km of the coast line in 25 years’ time, it is imperative that we address this risk now by starting to adapt.” He added: “The world cannot insure its way out of climate change, but the insurance industry can play a key role in the fight.”
