My Lords, I had not intended to intervene on this amendment but what the noble Lord, Lord Campbell-Savours, has said compels me to do so. That is because of the point that I made during earlier stages of the Bill: the question of insurance cover, or the lack of it, is not a lone entity as it also concerns the other financial structures that occur around property purchase and finance. I refer, of course, to mortgage lending because the existential risk of damage that might be covered by insurance is also an existential risk that affects mortgage lenders, as I explained previously. Because of the risks of default, mortgage lenders themselves wish to refinance or reinsure through the markets and the entire process becomes, to a degree, self-censoring.
The Minister has allowed me to belabour him fairly mercilessly with this principle and I realise that it lies, to a large degree, outside the scope of the Bill. However, it just so happens that it is also in consequence of what inclusion or exclusion from a construct such as Flood Re happens to expose. I come to this from the background of my profession as a chartered surveyor. I suppose that I ought also to declare that although I do not think that I have a property that has either suffered from flooding or is necessarily likely to be included in Flood Re in the first place, like other noble Lords, I of course have policies of insurance on properties, so I declare that interest.
The Minister was sympathetic during the last meeting I had with him, and I am very grateful for that meeting and for the listening ear that I encountered there from the Minister and his officials. To some extent, all one can do on that is wait and see. However, as it stands, the amendment from the noble Lord, Lord Campbell-Savours, highlights the very significant potential increases in insurance premiums that might need to be paid because of properties falling outside Flood Re but none the less being at some material risk. I am afraid to say that that material risk is a bit like the length of a piece of string. I think we debated this in Committee and the discussion then, which involved the noble Baroness, Lady Parminter, the noble Lord, Lord Krebs, who is no longer in his place, and the noble Lord, Lord Campbell-Savours, was very much about the mapping of the risk areas and just what you could or could not deduce from that process.
A more individual risk assessment is itself a slightly dangerous construct; when you consider that the whole purpose of insurance is to have a pool that spreads the risk, you might ask how far you want to move to an individual risk assessment. As we move towards that,
though, the danger is that you are then forced to look in more and more detail at the geophysical and hydrological factors that affect individual properties. We supposed in Committee that there might be rather a postcode lottery; I drew attention to the fact that I had been sent a piece of an Ordnance Survey sheet that showed Environment Agency blue ink cutting right through the middle of a linear-shaped postcode area, which was effectively one half of an urban street. That just goes to show that all sorts of properties that might not be at particular risk themselves will be caught by this.
My worry is that this unravels the other aspects in respect of the views of mortgage lenders. If insurance premiums go up fivefold, clearly that will affect ability to pay. That ability to pay is not so much the generality of repayment on a mortgage, and it certainly is not so much the generality of what happens in the leafy south-east, particularly within the M25; rather, the problem is the static and relatively constrained values in other parts of the country where the year-on-year increase in value does not provide that cushion to fund not only the possibility that there will be a default on the mortgage but also the damage that might be caused in the event of a flood, so you have a double-whammy situation. My fear is that it will impact most severely on those areas that are already in challenging, relatively flat and not particularly growth-rich areas of the country, and I think we all know that there are plenty of such areas.
It is therefore right that there should be a constant review, and I believe that the Minister intends that there should be a regular monitoring of what goes on and what the fallout might be from these various factors. I am hopeful that he will be able to say that constant attention will be paid to this issue. I am less clear about whether it requires the doctrinal imposition of some formal review, but the thrust of the noble Lord, Lord Campbell-Savours, is certainly important, for the very reasons that he gave and for the other unintended consequences that would potentially flow from the uninsurability of particular properties.
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