Banks are considering whether to make flood insurance compulsory for people taking out home loans on properties in flood-prone areas.

But even though the banks typically insist on mortgagees insuring their buildings as a condition of the loan, they see difficulties in forcing buyers to take out flood cover.

Bank of Queensland is considering requiring new mortgagees to take flood cover if they are buying in a flood zone, but CEO David Liddy says there are “practical obstacles” to forcing at-risk households to insure.

Earlier this month Mr Liddy said there would be problems for banks in monitoring whether borrowers maintained their insurance and whether lenders would be expected to call in a loan if homeowners let the cover lapse.

A Bank of Queensland spokesman told insuranceNEWS.com.au the bank considers the onus for maintaining appropriate insurance cover remains with the borrower.

She questioned how the bank would ensure whether the insurance was maintained “and what we would do it if wasn’t renewed”.

The Natural Disasters Insurance Review has raised compulsory cover on home loans as part of its focus on underinsurance.

Australian Bankers’ Association CEO Steven Münchenberg says individual banks are reviewing the situation and the association does not have a position on the issue.

A Commonwealth Bank spokesman says making flood insurance compulsory is an issue that would have to be considered by other key players, including governments and the insurance industry. The bank requires owners to insure and verifies the cover is in place, but it does not insist on flood cover.

A spokesman for ANZ says the bank insists customers take out home insurance but has not discussed making flood cover compulsory. Both ANZ’s branded insurance and its OnePath offering provide flood insurance. Customers opting for flood cover are covered for flash flooding and from this month all will be covered for riverine flooding as well.