Flood insurance: Waves of problems

The beauty of risk pooling

AT FIRST glance, Foxglove Mead in Chertsey looks like any other housing estate being built in Britain. As many as 98 homes, some worth £600,000 ($1m), are planned. But step onto the show-home’s newly laid lawn, where your correspondent felt his feet sink into the waterlogged soil, and questions over the suitability of this site become clear: these buildings are in an area at high risk of flooding. Pools of water from floods that last month inundated nearby houses (see picture) still cover neighbouring meadows.Sadly, this is but one of many new residential developments going up on floodplains and tide-swept coasts around the world: 21% of new homes built in London since 2010 are in high-risk areas. Instead of discouraging the building of flood-prone houses, governments are unwittingly encouraging homeowners to flush money down the drain.Most homes are built (or sold) only if they are mortgageable, and lenders sensibly insist that buildings are insured against common risks including that of flooding. This ought to provide a reliable mechanism to prevent the building of houses in places where they are at high…

Link to article: www.economist.com/news/finance-and-economics/21598664-new-proposals-reform-subsidised-flood-insurance-do-too-little-reduce?fsrc=rss|fec

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