Insurers warn housing growth areas face 74% hike in flood damage costs, with Thames Gateway the worst hit

New housing planned for the government’s key growth areas may be unisuarable due to the rising costs of flood damages, leading insurance experts have warned.

The Association of British Insurers (ABI) has warned that proposed developments in the Thames Gateway, Ashford, the M11 corridor and the South Midlands could carry unacceptable insurance risks.

A study commissioned by the ABI predicted an increase the costs of flood damage within the growth areas of 74%. One-third of the designated sites lie on flood plains.

Most of the additional cost comes from developments in the Thames Gateway, accounting for £47.1m a year of the £54.6m total extra cost. In its report, Making Communities Sustainable: Managing Flood Risks in the Government's Growth Areas, published on Tuesday, the ABI said that about 5% of tidal defences in the Gateway were in poor condition and needed urgent attention. There is only limited compiled information about the condition of a further 65% of defences.

The ABI figures were calculated using the Environment Agency’s assessment of flood risk. Sebastian Catovsky, ABI policy adviser, said: “If you map the sites earmarked onto the environment agency’s assessment, you can work out the potential risk of flood damage.”

He added that the cost could be higher, because not all data for in the Stansted area was made available by the local authority.

The Thames Gateway alone would account for £47.1m of the £54.6m total

The report outlines a series of measures for reducing flood risk on the sites, claiming that the greatest protection would be offered by land-use planning. It suggests that, for all areas except the Thames Gateway, moving properties off the flood plain and increasing the density in non-flood plain areas could reduce flood risk up to 96%.

In the Thames Gateway, the high proportion of sites located entirely on the flood plain means that a sequential approach to planning would be necessary to reduce risk. By allocating properties first to lower-risk sites, flood losses could be reduced by up to 52%.

However, the report warns that the need for additional homes in the future will constrain the effectiveness of land planning in reducing flood risk as lower risk sites become exhausted.

Other improvements include adapting building design by moving living space above flood levels, although this would increase building costs by up to 33%.

Improving defence schemes to reduce the chance of flooding would also substantially cut the chance of flood losses, but the report estimates that implementing such schemes would cost in excess of £330m.