Insurers fear new deluge

HOUSEHOLDS face a surge in insurance premiums as property damage caused by severe weather becomes more common, a climate change conference was warned today.The Association of British Insurers (ABI) said the worldwide cost of major storms is likely to increase by as much as two-thirds, taking the total in an average year to £15bn.

It wants the Government to commit to reducing carbon emissions, to continue to improve coastal and flood defences and help developbuildings that are more weatherproof.

Nick Starling, ABI's director of general insurance, said: 'Managing the effects of climate change is a key issue for the 21st Century. Insurance is a messenger of change for future risks, as well as a provider of financial protection against the unforeseen.

'Governments now have a chance to make rational choices for the future before it is too late. Making the right decisions based on first-class assessment of the financial costs of climate change will ensure lower costs for the public in future.'

The ABI predicts that by 2080 the annual cost of clearing up flooding in the UK could rise by up to £62bn.

It adds insurance markets could become more volatile. The capital needed by insurers to cover severe storms could rise by £43bn with increases of 90% for US hurricanes and 80% for Japanese typhoons.

Under the current agreement with the Government, signed in 2003, insurers are committed to provide flood cover as a standard feature in adequately protected areas. It has also committed to provide cover until 2007 for areas where the Government is improving flood defences.

However, there is nothing to compel insurers to continue offering insurance to high-risk homes after that date.

It is estimated that it costs between £15,000 and £30,000 to repair a flooded home and each year the insurance industry pays out between £500m and £1bn in weather-related claims.

Flash floods have caused huge damage to the communities of Boscastle, Carlise and the Yorkshire village of Sutton-under-Whitestonecliffe during the past two years.

Environment Secretary Margaret Beckett told the conference: 'The insurance sector has a particular role to play, by calculating and communicating climate risks. And because insurance is a global business, this will bring the global nature of the climate change challenge right to our doorsteps.'