Released on: November 28, 2007, 3:37 am

Press Release Author: Alexandra Lewis

Industry:

Press Release Summary: "Shifting the responsibility onto insurance companies to be
the final arbiters of building development is an incredible suggestion from Baroness
Young. This is merely a smokescreen to hide the decades of government
under-investment in flood defences - as identified in the recent National Audit
Office report.


Press Release Body: "Shifting the responsibility onto insurance companies to be the
final arbiters of building development is an incredible suggestion from Baroness
Young. This is merely a smokescreen to hide the decades of government
under-investment in flood defences - as identified in the recent National Audit
Office report.

Insurers and brokers have always played a role in risk management, including
advising the property sector about adequate loss prevention in the event of a flood.
However, the escalation of that role to provide teeth to the statutory planning
process would be unprecedented. This would surely be outside any insurer's remit,
extending into aspects of political and social policy.

Obviously, any property owner or developer facing the removal of flood insurance
will need to work closely with an insurance broker to research and secure a way of
transferring the risk. It is likely that cover will remain available somewhere, as
it did when terrorism cover was removed by the global market, but it will take
specialist assistance to achieve.

Baroness Young seems to have overlooked that the withdrawal of property insurance is
likely to affect existing as well as new buildings, leaving thousands exposed whose
cover is already under threat. Back in July, we warned that insurers could remove
flood cover in more areas of the UK if the government did not start rapidly
investing in adequate flood defences. The ABI has now indicated that the patience of
its members is wearing thin and that certain 'sacrificial areas' may be created.

However, the final call could rest with the reinsurers who have the power to force
the primary insurers to either increase their premiums or amend the cover - possibly
even to cancel it, as they did with terrorism insurance.

What if flood insurance is removed?

The implications, under the 2007 Commercial Lease Code, would mean that the property
owner is responsible for all repairs. In the event of flood damage, these could be
delayed because of lack of funds and owners could also face loss of rent which
tenants are entitled not to pay if the building is unusable. This potential income
shortfall will concern both owners and their financiers who rely upon the rent to
pay the debt. In these circumstances, there will inevitably be a call for the
government to create some kind of insurance pool, as it did for terrorism."

Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on
brokerage revenues and voted best insurance intermediary, offering classic car
insurance, high
value home insurance, entertainment and media liability insurance and
construction insurance.


Web Site: http://www.privateclients.aon.co.uk/privateclients/microsites/household/

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