Flood insurance bills soar to £4.5bn, according to ABI

The trade body is calling on the government to ensure that spending on flood defences is targeted to the most flood vulnerable communities with more people set to be at significant risk of flooding.

It noted that one in six homes in England is currently at risk of flooding. Nearly 500,000 people face a significant flood risk, and it has been estimated that this could rise to 840,000 by 2035 without adequate investment in flood defences.

At its flood conference "Fighting Flood Risk Together" the ABI stated that since 2000 insurers have paid out £4.5 billion to customers whose homes or businesses have been hit by flooding compared to £1.5 billion paid in the previous decade, a real terms rise of 200%.

The association explained that the reasons for the rise in flood costs include the increased frequency and severity of flooding in the UK and the growing problem of surface water flooding (the Environment Agency has estimated that 2.8 million properties are at risk of flooding from surface water).

It has been previously estimated that the total value of assets under flood risk exceeds £200 billion - more than the current budget deficit.

Speaking at the conference, Tim Breedon, ABI chairman and group chief executive, Legal and General, said: "Flooding devastates lives and communities. Insurers play a key role in helping those affected recover, but prevention must be better than cure.

"The recent announcement of a cut in Government investment in flood defences was disappointing, and it is now vital that Government spends its money wisely to bring real improvements where they are most needed."

Barry Smith, chairman of ABI's property committee and chief executive of Ageas UK, stressed at the conference that: "Millions of customers rely on the financial protection provided by flood insurance, and insurers are determined to do everything possible to ensure this continues."

He concluded: "The insurance industry's flood insurance agreement with the government, under which insurers commit to offering flood cover to existing customers, expires at the end of June 2013. To ensure flood insurance continues to remain widely available and competitively priced, further investment in flood management is needed when the public purse is in better shape."