Global warming gives insurers cold feet on prefab homes

The government's drive to encourage the use of off-site manufactured housing is facing a serious setback after insurers revealed they may refuse to provide cover for such buildings.

The Association of British Insurers said it had concerns about how OSM housing will stand up to the increasingly volatile British climate.

The government's Challenge Fund allocated housing assocations £300m last year to build an additional 1400 homes using "modern methods of construction".

But Jane Miles, head of household and property at the ABI, said: "It's not apparent to us that anyone has looked into the resilience of these houses. If certain types of construction become associated with problems, they will be more expensive to insure.

What we build today has got to be facing the elements in 50 years. Nobody has taken account of this so far

Jane Miles, Association of British Insurers

"Ultimately, there could be a problem with securing insurance at all."

Homeowners currently pay an average of £250 in insurance each year. Miles said there was the potential for this to rise to as much as £8000 in some areas if risks increased.

She added that the ABI was disappointed by the government and industry's reaction to the issue: "What we build today has got to be facing the elements in 50 years' time. Crucially, nobody has taken account of this so far."

Michael Hill, business development director for Countryside Properties, confirmed: "There's an area of uncertainty over how prefab will perform over time."

Increased insurance premiums, higher excesses or an inability to insure would be a serious blow to the off-site manufacturing sector, already facing criticism that its methods are too expensive compared with traditional housebuilding.

The ABI is searching for a partner to research whether homes built by modern methods will be able cope with the climate change expected to hit the British Isles in the next 100 years. It hopes to have preliminary findings in 2004.