Baroness Young, chief executive of the Environment Agency, has called for the insurance industry to withdraw cover as a deterrent to developers who plan to build commercial property on flood plains, despite being refused planning permission.

Bill Gloyn, chairman of European Real Estate at Aon (a risk management and reinsurance company), believes this is a smokescreen to hide decades of the Government’s under-investment in flood defenses.

Gloyn said: “Insurers and brokers have always played a role in risk management, including advising the property sector about adequate loss prevention in the event of a flood. Obviously, any property owner or developer facing the removal of flood insurance will need to work closely with an insurance broker to research and secure a way of transferring the risk. It is likely that cover will remain available somewhere, as it did when terrorism cover was removed from the global market, but it will take specialist assistance to achieve.”

If flood insurance is removed then the implications, under the 2007 Commercial Lease Code, would mean that the property owner is responsible for all repairs. In the event of flood damage, these could be delayed because of lack of funds and owners could also face loss of rent which tenants are entitled not to pay if the building is unusable. This potential income shortfall will concern both owners and their financiers who rely upon the rent to pay the debt.