Insurance boost for 'flood risk' homes

HOMEOWNERS who previously thought their properties were un-insurable due to flood risk may soon be eligible to qualify for cover again.

The insurance giant, Norwich Union, has developed a new digital computer model that will identify individual properties at risk of flooding, the company announced yesterday.

The new technology should mean far more accurate premiums for an estimated five million people living in flood risk areas across the UK.

As well as showing whether a property is at risk, the computer model indicates how often a flood is likely to occur and to what depth.

The multi-million pound project was launched yesterday for parts of Shropshire and Norfolk, but will eventually be rolled out across the UK, including high-risk flood areas of Scotland by the end of 2004 such as Elgin, the Ayrshire and Dumfries-shire coast, Edinburgh, Largs and Shettleston in Glasgow.

Such is the seriousness of the risk in Elgin that councillors last week agreed to build a massive flood-protection wall through the centre of town. The project, which will cost 95 million, will prevent a repeat of the floods which have devastated parts of the Moray town three times in the past seven years.

Unlike previous systems, which tended to lump all post codes together and penalise some homeowners who had never been flooded, the insurer believes that more people are likely to benefit from the computer model as it may indicate that their property is not in fact at risk, or will not flood as often as previously thought.

Laurence Loughnane, head of underwriting at Norwich Union, said: "

The new information will help to convey to customers just how severe the flooding risk to their property will be and how often a flood can be expected."

Norwich Union is one of the first insurers to set premiums based on a particular address rather than just a post code.

The flood map was developed using an airborne radar system to show the height of the ground above sea level.

One of the major obstacles in the past in flood prediction has been the lack of detailed and accurate information on the height of land near rivers.

Malcolm Tarling, a spokesman for the Association of British Insurers, said: "Insurers will always be looking at ways in which they can more accurately assess risks. We are in an environment now where flood risk is going to get worse because of climate change. In the UK there are around two million properties vulnerable to flooding. To enable insurers to do this, they first need to assess the risk, which this company can obviously now do.

"We also need to see action from government, and they have to put in investment in flood defences. They also need to ensure the money gets to the areas in need quickly.

"It is a partnership approach. The ABI wants insurance companies to offer cover to as many home owners as possible, but we also want the best possible management of flood risk."

Meanwhile, the world’s second-largest reinsurer, Swiss Re, warned yesterday that the costs of natural disasters, aggravated by global warming, threaten to spiral out of control.

In a report revealing how climate change is rising on the corporate agenda, Swiss Re said the economic costs of such disasters threatened to double to $150 billion a year in ten years, hitting insurers with $30-40 billion in claims, or the equivalent of one World Trade Centre attack annually. "There is a danger that human intervention will accelerate and intensify natural climate changes to such a point that it will become impossible to adapt our socio-economic systems in time," Swiss Re said in the report.

It comes as a growing number of policy experts warn that the environment is emerging as the security threat of the 21st century, eclipsing terrorism.

Scientists expect global warming to trigger increasingly frequent and violent storms, heat waves, flooding, tornadoes, and cyclones while other areas slip into cold or drought.

"Sea levels will continue to rise, glaciers retreat and snow cover decline," the insurer wrote.

Pamela Heck, a climate expert working for Swiss Re, said losses to insurers from environmental events have risen exponentially over the past 30 years, and are expected to rise even more rapidly still.

"Scientists tell us that certain extreme events are going to increase in intensity and frequency in the future, and climate change is very much in the mind of the insurance industry," she said.