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General Election 2024: Alert for property insurers

Where does the current political uncertainty leave property insurers?

The United Kingdom is heading for a General Election on 4 July 2024. If the Opinion Polls are correct, the country could well be set for a Labour Government.  

As at the date of publication of this article, Labour’s official election manifesto has not been published. However, the soundings given by the party over the last few months suggest that the reform of planning will be at the front and centre of its economic policy.  

In December 2023, the UK Government published its (some may say long – overdue) revisions to the National Planning Policy Framework. 

At the heart of the National Planning Policy Framework (‘the Framework’) was a desire for ‘sustainable’ development. The Labour Party have indicated that they will look to review and possibly scrap many aspects of the Framework.  

However, it is likely not going to be disputed by property insurers that sustainable development is a commendable goal.

But, where does the current political uncertainty leave property insurers?

Certain aspects of the current Framework may give property insurers cause for concern.

  • The Framework requires that ‘effective use’ is made of land. This includes giving ‘substantial weight’ to developing on brownfield sites. Developing on brownfield sites is, of course, sensible in many ways and is often very done very successfully. However, it must also be noted that such sites are often especially vulnerable to flooding.
  • The Framework requires the construction of ‘high quality, beautiful and sustainable buildings’. To the extent that this promotes (or indeed necessitates) the use of modern methods of construction, property insurers will be well alive to the increased risk of fires and escapes of water posed by such methods, which have not yet been fully tested by the passage of time.
  • It is proposed in the Framework that planning should seek to address and mitigate climate change. An example of how this might be achieved is the increased use of no carbon and renewable energy sources. Again, this is commendable, but such an approach may also raise concerns for property insurers. For example, it has been reported that fires caused by solar panels increased sharply in 2023[1]. Likewise, heat pumps are reported to be more susceptible to electrical fires, water and soil pollution. This is especially true where such installations have been poorly fitted, perhaps due to cost concerns.
  • In relation to developing on areas at high risk of flooding, it is noted that the Framework suggests that this should be avoided by directing development away from areas at highest risk (whether existing or future). However, provision is made for development in such areas if  “it is necessary”.  It is not clear how the issue of whether or not such development is necessary will be determined and, without clarity on this issue, we may well see quite substantial development in such areas.
  • Further, where development is permitted on such areas, the development should be “made safe for its lifetime without increasing flood risk elsewhere”.  It is unclear how such an assurance could ever be obtained, with factors such as the likely lifespan of the particular building and the potential for the flood risk to increase elsewhere clearly open to debate.
  • Property insurers and property owners alike might be concerned by this approach; especially given that Flood Re (i) does not cover properties which were built after 2009, (ii) does not cover commercial premises and (iii) will be coming to an end in 2039 in any event.

However, it remains to be seen whether Labour’s proposals will alleviate or exacerbate these risks. It would seem, from the early indications, that Labour’s planning proposals will be underpinned by a desire to ensure that a staggering 1.5 million new homes are built over the course of the next parliament.

The plan also includes the construction of the ‘next generation’ of new towns, and a ‘planning passport’ for urban brownfield sites.

We will keep a close eye on the detail of their plans once the manifesto is published and will report further on how those plans may impact property insurers if, as predicted, the Labour Party wins the forthcoming election. 

[1] Source: The Independent – September 2023

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