Insurers could withdraw cover or ramp up premiums on floodplain schemes as climate change costs mount.
Future development on floodplains is under threat because of rising insurance premiums.

Insurance experts are warning the construction and property industries that climate change will severely affect such developments in the future.

They claim that either property values in flood-prone areas will plummet as insurers refuse to provide cover, or premiums will be ramped up to cover their liability.

Julian Salt, project manager for natural perils at the Loss Prevention Council's Centre for Risk Sciences, the insurance industry's research organisation, warned: "Insurance companies have two options: either to put up prices or to pull cover."

With 350,000 homes earmarked for development on floodplains, this could mean disaster for developers.

John Parker, head of general insurance at the Association of British Insurers, called for immediate action to stave off the threat.

He said: "It is imperative that appropriate flood defences are constructed, or insurers might not want to issue cover on a property, and that will affect prices."

The ABI has given the government two years to provide adequate flood defences before it starts excluding geographic areas from insurance cover, either by not quoting at all or by offering prohibitive rates.

Reinsurer Munich Re estimates in Natural Catastrophes 2000 that 7% of the UK's building stock 鈥� worth 拢215bn 鈥� is at risk from flooding. Half of this is in the London area. With no insurance cover, prices in these areas could fall dramatically.

Flooding is just one result of climate change. Insurance premiums are also set to rocket to reflect the risks posed by other changes in the UK weather, including increased frequency and severity of storms, high winds, droughts and rising ground temperatures.

Last year, storm damage accounted for 46% of all weather-related insurance claims.

Insurers are set to discuss their response to climate change at a conference planned for September, called Climate Change: Will it Sink Property Insurers?

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