Flood risk could make 300,000 homes uninsurable

The insurance industry has said the government's plans to build 85,000 homes in the Thames Gateway must be modified - to include safeguards such as only occupying homes above first-floor level - due to the high risk of flooding.

The Association of British Insurers (ABI) says the Thames Gateway developments will be uninsurable unless special measures are taken to minimise the flood threat, making it impossible to get a mortgage.

Insurers also warn that plans by deputy prime minister John Prescott for more than 200,000 new homes at Ashford in Kent, the M11 corridor from the edge of London north to Peterborough, and around Milton Keynes would face similar problems because many of these homes are on existing flood plains.

The average annual cost to the industry of flood damage to the new developments would be £54.6m, most of it in the Thames Gateway, says a report for the ABI.

Jane Milne, head of household and property at the ABI, said: "These kind of losses are just not acceptable to the industry. The premiums would either be so high that people could not afford to pay them, or the industry might think the risk was unacceptable at any premium."

The report follows repeated Environment Agency warnings that local planners are ignoring its advice not to build on the flood plain, and increasing industry alarm at the cost of insurance damage from floods.

The flood risk assessment of the planned settlements takes no account of climate change.

The objection to the Thames Gateway proposal is that the area for the planned homes is below existing high tide levels, and flood defences for Thames tributaries are not up to standard.

The report says the poor state of river flood defences means there is a more than 1% chance of flooding each year. With climate change, and the type of localised heavy downpours recently seen in Carlisle and Boscastle, the chances of flooding could be far greater and prove disastrously expensive for the industry, says Ms Milne.

Insurers say that the problems with the three other proposed housing growth areas are more easily soluble.

Ms Milne said: "The fact is that some of the development areas are in flood plains and some are out of harm's way. Our problem is that some local authorities carry on as if flooding was not a threat and ignore the advice of the Environment Agency and give permission to build in the middle of the flood plain anyway.

"Properly planned developments, which use the flood plain for sports fields, parks or other green spaces, can accommodate the required number of new homes and businesses without causing an unacceptable risk. What we need is to get this across to the planners, otherwise we cannot guarantee to insure some of the homes they build. This would mean no mortgages for these people."

In the Thames Gateway 89% of the proposed properties are in the flood plain. To get insurance the properties would need to be properly protected with river and sea defences kept up to the highest standard. There must also be special provisions, with garages and other non-occupied areas on the ground floor, and all electrics well above flood level. This would provide "resilience" in houses so if they were flooded they could quickly be reoccupied.

"We are not saying these developments cannot be built - clearly that is the government's will and policy - and so we are happy to cooperate, but they need to listen," Ms Milne said.

"What we are saying is that we will not bear unacceptable risk, and we could plan so the risks are acceptable. We want to make that clear before the plans get any further down the road."

The Office of the Deputy Prime Minister, which is responsible for the new developments, said the ABI would continue to offer insurance if flood risk was prudently managed.

"Development in the Thames Gateway, as elsewhere in the country, will be expected to be in line with government planning policy which ensures that flood risk is considered at all stages of the planning and development process from regional plans, to local plans, to individual site development," said an ODPM statement in response to the report.