Low-income homeowners in Britain are being left stranded in so-called “flood ghettos” without access to insurance, as developers continue to build in high-risk areas with little regulatory oversight, according to a major new report.
The Grantham Research Institute (GRI) on Climate Change and the Environment has warned that UK housing policy is fuelling a dangerous divide. In a comparative study of new-build flood exposure in the UK and France, researchers found that housing developments in both countries are increasingly located in flood-prone zones — with the poorest residents most vulnerable to financial loss and least likely to be insured.
While France covers all domestic homes under its national flood insurance system, the UK’s Flood Re scheme excludes any property built after 2009 — a policy designed to discourage building in high-risk areas. Yet with government housebuilding targets pushing developers into marginal land, insurance experts are questioning whether such a policy remains viable.
Hannah Gurga, director general of the Association of British Insurers, said: “As the drive to build 1.5 million new homes gets underway, the government needs to carefully consider where and how these homes are built. Every house needs to be able to withstand flooding, extreme heat, stronger winds and subsidence, and must not be built in flood-risk areas.”
The report was released shortly after the Department for Environment, Food and Rural Affairs pledged £7.9 billion for flood defences over the next decade - a move welcomed by the insurance sector. However, many believe that funding alone will not solve the problem.
Liz Mitchell of Flood Assist Insurance said a lack of due diligence around flood risk was fuelling an insurability crisis. “One of my big beefs is that no one ever checks if a property is insurable - they just build on it. It’s not part of the planning process,” she said.
Mitchell warned that many homeowners have no idea they are exposed to flood risk until it is too late. “Surface water flooding is one of the biggest challenges in the insurance market at the moment, and you can't see it. It can be as simple as a blocked drain or a new estate down the road changing surface water runoff - and it descends into people’s homes.”
Even properties built with supposed mitigation measures, such as enhanced drainage or attenuation ponds, can still flood. Mitchell said that in some cases, these measures are either inadequate or never completed. “Just because they put planning conditions in, it doesn’t make it insurable,” she said.
The consequences can be devastating. Mitchell recalled a recent case in King’s Lynn: “A lady came to us, her home flooded this year - a 2013 build - surface water, no visibility of it. Quarter of a million pound claim. The insurer didn’t see the risk at the time. Now she can’t get covered. I said, I wish I could help you. But she’s uninsurable.”
She added that there’s a wider misunderstanding of the role insurance can play in offsetting systemic risk. “You don’t ask Tesco to fix food poverty,” she said, making the point that the insurance industry is being unfairly expected to absorb the consequences of poor planning decisions.
Implications for brokers and insurers ahead of Flood Re’s end
The GRI study urges UK policymakers to better integrate flood risk into planning and housing policy - particularly as Flood Re is set to end in 2039. For brokers and underwriters, growing lender caution around insurability in flood-prone areas may signal tighter terms ahead, making early due diligence on new-build risks increasingly essential.
