Thursday, September 13, 2012

What Happens When the Flood Insurance Runs Out?

Nobody can predict precise weather patterns and especially rainfall intensity. The result being that as Climate Change bites and the seasons merge, a large percentage of UK property owners, domestic and commercial, will potentially be at risk in multiple ways.

Some need flood insurance under strict contract, lease or occupational licence terms. Others that have flooded before will need continuing insurance for both peace of mind but also to ensure the value of their castle is not diminished. Those of us who are simply cautious will need to understand what has happened, what might happen and decide what stance they will next take when they start to think about their next housing investment.

House values could easily fall if an effective and believeable solution is not brokered very quickly now. If the solution is vague on detail and fails to allay purchaser suspicions then bid prices will fall and many peoples brick-and-mortar investment will be in tatters. Value will go down the drain, not just rainwater.

Therefore we come full circle and must begin to self-help ourselves and not rely on good luck and sometimes generic Risk Analysis Reports. Such help starts with using our own eyes but must become a little more sophisticated compared to now.

The Government are not yet releasing details of the post June 2013 answer to the current serious flood dilemna but it seems they are proposing something like this --- Creation of an Insurance POOL to pay claim sums over an agreed top level sum; this may only apply to domestic housing and it may be funded by a levy on all insurance premiums - any claim over the pool reserve amount would be met by Government.

Self-help would start with potential buyers thinking twice about deciding what homes to consider buying. Frankly Developers still constructing new homes on known flood plain land areas is unacceptable unless substantive flood defence works are scheduled to finish very shortly (before June 2013).

Secondly Surveyors and Valuers, those advising home buyers, should distinguish between Flood and Flood Plain risks on the one hand, fairly well documented and usually tabulated in local Environmental Risk Analysis Reports completed on each conveyance, and a visual risk assessment on the other hand.

The latter would further define if exceptionally high rainfall could cause a flash flood risk. Questions like (1) is the road-system at a higher level that the home plot? (2) is storm water taken away from the area, or stored locally or in soakaways? (3) can any storm drains be seen around the estate/district? (4) is the subject home in a dip, or at a low point in the terrain? (5) is the subject home designed/constructed in such a way that flash flood risk is reduced or not? etc...

The Surveying and Valuing industry need to work together to establish a clear set of common-sense visual assessment matters that need careful Surveyor intrepretation OR Valuers will simply assume the worst and down-value the home as adequate loan security. This would be catastrophic for Sellers who could see their investments fall in value or become virtually unsaleable.

Personally I am designing my own self-defence policies and protocols for use on behalf of my own clients but is my industrial Regulator, the Royal Institution of Chartered Surveyors, and the Insurance industry in general going to help me, or not. Watch this space but above all HELP YOURSELF by thinking about flooding and not just pretty wallpaper and are the walls cracked.

Stuart K. Parrett is a residential property expert in England: he is a registered Valuer, expert witness and a fellow of the Royal Institution of Chartered Surveyors. He operates both PROinspect Consultancy and Inspection4 Ltd for Hampshire County and all-England home surveys (and much more) respectively.

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