With the Environment Agency estimating that approximately 5.2 million properties are at risk from flooding, the continuing need for affordable flood insurance is beyond debate. Insurers have resisted funding the contingency for high-risk properties, which has resulted in governmental persuasion through a series of pooling agreements with the ABI. This is especially relevant in a precarious property market where a lack of flood insurance will mean no mortgage offer. The latest proposed reinsurance pooling agreement with the ABI (Flood Re) will only cover some residential properties from July 2015.

The hope is that insurers will, independently of Flood Re, decide to underwrite the flood risk for commercial properties, higher value residential and properties built post-2009. Unless or until that hope becomes reality or the government steps in as the provider of an insurance overdraft, the properties left at sea by Flood Re look set to drift on the tide of insurers’ whims.

So, what are the options for those involved with higher value residential and commercial property? The key is to identify as soon as possible if flood is a real risk and if insurance is both available and on terms and cost that are sustainable.

Any lacuna can be filled with careful drafting of property agreements, depending on the parties’ appetite and resource for funding flood damage repair. One example of this is the insertion of an uninsured damage carve out in a lease where both landlord and tenant have options to rebuild or terminate the lease in the event of flood damage where insurance is unavailable now or in the future.