flood re
there is more detail on how flood re was designed and operates on our background page, flood re explained .
copyright © flood re. flood re limited is registered in england and wales (08670444). flood re is authorised by the prudential regulation authority and regulated by the prudential regulation authority and financial conduct authority (frn 706046 )
flood re has been set up to help those households who live in a flood risk area find affordable home insurance .
insurance companies are able to pass on the flood risk element of eligible home insurance policies to flood re. flood re charges the insurers a premium for each policy, based on the property’s council tax band .
to see in full which properties are eligible for the flood re scheme please click here .
flood re is, essentially, insurance for insurance companies. this means that when a homeowner makes a flood claim, the insurer can pay out to the customer, and flood re will then reimburse the insurer .
brendan mccafferty, chief executive of flood re, said its introduction should make flood cover more affordable and accessible over time .
flood re will continue to add the names of brands to the list as soon as they become able to provide insurance to householders which are likely to include the benefits of flood re .
a list of the insurers using flood re is regularly updated on the flood re website and there is an online broker finding service provided by the british insurance brokers association (biba) .
no. flood re will only reinsure properties where the build was completed prior to january 2009 .
flood re charges insurers a fixed premium for flood risks passed to it, based on a property’s council tax band. in addition, flood re charges an insurer an excess of only £250 per policy. to cover the shortfall between the estimated cost of flood damage and the new, lower premiums and excesses, insurers pay flood re a combined total levy of £180m per year .
in 2039 the flood re scheme will end and there will be a free market for flood risk insurance. there will be a review at least every 5 years to assess flood re’s progress in managing a transition to this free market, which may consider the premium charged for each policy and the levy charged by flood re to uk home insurers .
flood re welcomes the news that the secondary legislation that defines how flood re will operate has today been laid before parliament by the secretary of state for the environment, food and rural affairs, elizabeth truss .
here is some further information about flood re and its background, what’s covered and why and funding issues .
flood re is a new way to help people who live in flood risk areas get affordable home insurance. it launched on april 4th 2016 .
flood re also offers insurers an excess per policy of £250. although flood re has no control over the way insurers set the excesses for individual customers, this mechanism should benefit people living in areas at risk of flooding .
flood re is planned to be in place until 2039. as well as helping to enable home insurance to remain affordable in areas at risk of flooding, flood re also has a role to help manage a transition to home insurance prices that fully reflect flood risk. this means that people benefiting from flood re need to become more aware of their flood risk and, if possible, take action to reduce it .
launched on april 4, 2016, flood re aims to give homeowners in high flood - risk areas more options when it comes to protecting their properties .
please note that flood re is not responsible for setting prices or the terms of a home insurance policy as this is at the discretion of each insurer. in publishing the list, flood re is not acting as an introducer, administrator or intermediary for household insurance policies. flood re does not sell home insurance, recommend particular brands or provide advice .
flood re is a scheme that gives households at high risk of flooding access to affordable insurance. all insurers who offer home and contents cover pay into an annual pot of £180 million and any claims against flood damage from policies eligible for flood re will be drawn from there .
76. ministers concede that flood re constitutes a
novel approach ,
with many details still to be worked through with the industry, including the relationship between flood re and parliament. flood re, rather than ministers, would be directly accountable to parliament for its operations, with ministers remaining accountable for overall flood insurance policy. the government proposes introducing a
bespoke scrutiny, administrative and regulatory arrangement
for flood re since this would avoid the scheme' s funding being considered tax and therefore public expenditure. [
70. the committee received evidence from richfords fire and flood proposing a variation on the flood re model;' flood re mutual' under which a levy on all insurers offering household insurance would be pooled to fund reinsurance and pay out for areas with a greater than 1 - in - 75 year flood risk. [
the launch of the flood re scheme is the result of the government working closely with the insurance industry to make affordable flood insurance available to households across the uk .
it is great news that flood re is now open for business. it is fantastic step forward - making flood insurance affordable for people regardless of where they live .
“we, the government and the abi recognised this lack of competition in the market and that’s where the idea of flood re - a not - for - profit re - insurer - first came from. ”
in the event of a huge flood event, which led to a national emergency, the government would step in if the money in the flood re scheme was insufficient .
these agreements did not address the affordability of the home insurance provided, however, and so the insurance companies and the government worked together to develop a different way of dealing with flood insurance. they decided on a ‘flood re - insurance’ scheme – known as flood re – to help support households at highest flood risk. an important part of the flood re scheme is to provide information to consumers about how to increase their understanding of their level of flood risk and how they can take action to reduce that risk .
the introduction of flood re means you have peace of mind that, even after a flood claim, you should still be able to find insurance with affordable premiums and excesses .
six months after launching on 4 april 2016 53, 000 home insurance policies are now backed by flood re, benefiting customers in high flood risk areas all over the uk .
the cost per household premium per year is cited in the government' s consultation on flood re as being £10. 50 per year
the list below shows brands that are currently able to provide insurance to householders which are likely to include the benefits of flood re .
“the customer never gets involved directly with flood re, their relationship is always directly with insurers, ” bostock adds. “we, as insurers, will always pass on any savings to the customer from their eligibility for flood re cover, and that is all determined by the level of flood risk for that property .
only people who live in flood risk areas will benefit from flood re, and even then it will depend on how much you pay for the flooding part of your home insurance .
through the scheme, flood insurance for those at the highest risk of flooding starts at £210 (council tax band a) with the excess charged by flood re set at £250 .
there are many specialist catastrophe reinsurers around the world such as swiss re and munich re. these companies have specialists who calculate the probabilities of time scale over which these catastrophes occur .
the abi has comes up with the idea of flood re, which is an emergency fund that would pay out claims related to flooding .
here is flood re’s first transition plan, published on schedule, in february 2016, three months after the secondary legislation passed through parliament .
homeowners will not have to deal with flood re directly and should not have to do anything differently when it comes to making a claim .
flood re is a success story of how government can work with industry to bring real changes that will benefit hundreds of thousands of households .
the flood re scheme was not designed to cover small and medium enterprises (smes). the focus of the scheme has always been purely residential, enabling homeowners to protect their own homes. flood re is aware of a new commercial insurance scheme launched by the british insurance brokers’ association (“biba”) which may be able to assist smes which are not eligible for the flood re scheme. details can be obtained from biba .
worse, cccep note that far from alleviating the problem, the flood re scheme may actually make things worse. for example, mortgage providers and developers profit from building properties on flood plains, and while an uninsurable property cannot be mortgaged, flood re provides low cost insurance to the otherwise uninsurable. cccep’s response emphasises that mortgage providers and developers should also contribute to reducing flood risks .
“laying the secondary legislation is a highly significant milestone on the path to the establishment of flood re. it marks the completion of negotiations with government, allowing the legislative process to be completed after the election, and is the result of many months of very detailed work between flood re, the industry and government. the regulations provide the certainty necessary to allow us to move into the build and test phases of flood re’s development .
insurers are still in control of pricing for overall home insurance. flood re charges a fixed premium per policy to insurers, relating to the flood element of the policies transferred to flood re. these premiums are lower than would be the case if the flood risks were fully taken into account, as contributions to the costs come from a statutory levy on all home insurers in the uk .
flood re does not set prices for home insurance, but gives insurers the opportunity of passing to it the flood risk element of a home insurance policy (buildings and contents) at a premium that is capped, depending on the council tax band of the property. it is up to an insurer to decide whether they wish to pass the flood risk element of the cover to flood re .
“the reason for the 2009 cut - off is to encourage responsible construction - the introduction of flood re shouldn’t be seen as a way of opening up areas to build upon in flood plains. ”
flood re accepts the ceding of policies covering tenants’ possessions and contents of rented properties subject to the usual eligibility criteria, which can be found here .
in simple terms, a wider choice of insurers and lower premiums for those at risk of flood damage or who’ve made a similar claim before. these are the people who, bostock says, will benefit the most from flood re because “they’re the ones who, at the moment, will almost always be on the ‘declined’ list”. the determination of ‘high risk’ does differ from insurer to insurer though, and isn’t a decision made by flood re .
flood re replaces a previous agreement between the government and members of the association of british insurers (abi), which guaranteed flood insurance for high - risk properties. it also had a few drawbacks .
] however, the government states that these arrangements
offer parliament less control and less insight into flood re' s operations
than if the scheme were treated as part of the public sector. flood re would also be likely to be classed as state aid and would need european commission approval. [
flood re is partly subsidised by a tax levied on all insurers that offer home insurance in the uk. flood re does not regulate if or how insurers choose to pass on this tax to their customers. it is therefore possible that an insurer will choose to spread the costs across even those policies within their portfolio that do not include high flood risk .
] the association told us that under flood re policies for these properties would be charged at a set price, according to council tax band. it estimated that in a free market premiums for a home in a high risk area would be around £1, 400 as opposed to around £750 under flood re. [
74. the government acknowledges that flood re does not achieve
the level of value for money normally required of government policies
since the costs of flood re, including the necessary reinsurance contract, are expected to be greater than its economic benefits. a ministerial direction would be required before implementation can proceed. [
the flood re scheme is simple. customers will buy home insurance as normal but the extra insurance costs associated with a high risk of flooding will be passed on to flood re - to be funded by a levy on the insurance industry. other home insurance customers will not see their bills rise as a result .
“flood re will make a difference in people being able to afford the right cover. there are areas of the country that very few insurers will touch because it’s too big a risk but we, as an industry, have an obligation to ensure those people are protected. flood re will help with that. ”
the proposed model creates a reinsurance pool called flood re to which insurers may cede the worst flood insurance risks. this way an insurer can retain only the risks it considers of commercial value in its own portfolio. flood re acts as a reinsurer that takes on only the very worst risks, removing them from the market and saving those in high - risk households the high premiums they would otherwise have to pay for flood insurance .
we reported back in january that this winter’s floods had hit businesses particularly badly, and many weren’t covered by insurance because it was too expensive. while flood re, which came into force in april, offers affordable flood insurance for homeowners, businesses aren’t covered. but sustained pressure from interest groups led to a u turn on this and so we now await ‘flood re 2’ .
of the eligible households in the uk, we expect around 350, 000 to benefit from the effects of flood re over time. that’s 2% of eligible households. people won’t be dealing with flood re directly, they’ll still be buying their insurance as usual. insurers will be well prepared to deal with customer enquiries .
for the avoidance of doubt, flood re will only cover contents and fixtures and fittings that relate to the residential part of any mixed use premises. we would not expect appliances and trade tools used solely for business purposes (such as dog grooming appliances or hairdressing tools) to be covered by flood re’s definition of “contents” .
four broad ways to address the availability and affordability of flood insurance have been considered. there are no easy options to deliver affordable flood insurance and all involve a degree of cost. however, following extensive discussions the government has reached a headline agreement with the association of british insurers on a proposed way forward. this will focus on delivering the abi’s proposed “flood re” reinsurance pool for high risk households. a memorandum of understanding on flood re is being published alongside this consultation, with further details provided in this document. i would welcome your views on flood re as the leading proposal at this stage .
we then take responsibility for that part of your policy and if you make a valid claim on your insurance we’ll reimburse the insurer from the central flood re fund .
there has been a temporary ‘memorandum of understanding’ in place in the interim, but this has to be replaced by a definitive solution that will be titled ‘flood re’ .
one of the biggest criticisms of the new flood re scheme, which came into force earlier in the year, is that it doesn’t cover small businesses. we’ve written lots over the last few years about this: flood re has been introduced to provide affordable flood insurance for properties in high - risk areas, but it excludes businesses, buy - to - let properties and new builds .
james dalton, director of general insurance policy, association of british insurers said: “flood re shows the insurance industry’s commitment to making sure affordable home insurance is accessible, even to those at high flood risk. insurers have invested substantial time and money on the development of flood re so it’s encouraging to see that only six months in there are already 50, 000 households benefitting. flood re’s benefits will continue to expand over time and we would encourage those who haven’t done so already to shop around to see how the new competitive market can help them. ”
flood re makes no difference to how you purchase your home insurance, whether that’s through a price comparison site, directly from an insurer or through a broker. once you have purchased your policy you will always deal with your own insurer even if you need to make a claim. you do not need to contact flood re directly .
up to half a million households in high flood risk areas now have access to affordable flood insurance as flood re has officially opened for business. following the final green light from the prudential regulatory authority (pra), the world - first scheme is now accepting policies from insurers .
yes, flood re has purchased its own reinsurance and holds reserves and capital so that it can fully cover all claims in at least 99. 5% of years .
flood re requires insurers to meet all of the eligibility requirements, in good faith. the scheme is designed to assist homeowners most at risk of flooding, not businesses or properties being rented out for commercial gain. flood re’s own reinsurance is based on the same eligibility criteria so it is important that only eligible risks are ceded to us .
the government and the association of british insurers agreed on a way to allow for affordable insurance in areas affected by flooding. this is known as' flood re' .
information about the role of the flood risk strategy team, policies and strategies the council has, the flood risk asset register, and plans to invest in flood risk infrastructure .
flood re is not a home insurer itself – instead it works behind the scenes with existing insurance companies. flood re helps insurers offer more affordable flood insurance to those in areas at risk of flooding. it will mean people can shop around more easily to find policies with more affordable premiums and excesses. the scheme will develop over time so people should find they have even more choice in the future .
james dalton, general director of the association of british insurers, said there was no rush to take action today, as the “benefits of flood re will develop over time” .
flood re makes no difference to the way customers themselves buy their home insurance. all claims continue to be handled by the insurance companies themselves, and insurers continue to set the premiums they charge to their customers, taking into account the flood re premium and other important factors (such as the risks of fire, theft, subsidence and other costs). as a result of the flood re scheme, there is now greater choice of home insurance policies for customers at risk of flooding and those policies should be more affordable .
you’ll probably notice little to no difference in the way you take out an insurance policy. flood re will just work in the background to enable insurers to offer more competitive deals, and give homeowners more choices on both contents and buildings insurance. part of the overall premium you pay will go towards the flood re pot – but that’s about it .
it seems that things are on track for what could be called flood re 2. according to recent reports, a new scheme to extend flood re to cover businesses is likely to be launched in the autumn. it’s not good news for all businesses: it seems that only smaller businesses will be covered, but precise details have not yet been announced .
six months on from launch, consumers in high flood risk areas are taking the opportunity to access more affordable flood cover .
part of the flood re scheme includes providing information to people about how to increase their understanding of their level of flood risk and where they can find information about taking action to reduce their risk, where possible. flood re will only operate for 25 years, allowing time for the government, local authorities, insurers and communities to become better prepared for flooding. this could mean, for example, making use of effective land planning, sustainable drainage, sustainable development and effective flood risk management .
insurers remain responsible for pricing and deciding how best to pass on the benefits of lower premiums and excesses charged by flood re to customers. for further information on the funding structure click here
floods minister thérèse coffey said: “thousands of families will have peace of mind this winter and in the future as they benefit from affordable flood insurance to protect their homes thanks to flood re. if the worst happens, this support will be invaluable .
flooding is devastating. nothing can take away the distress it causes. but affordable flood insurance will help people get back on their feet more quickly and secure their futures. so the government and the insurance industry have worked together to establish flood re to provide affordable excesses and premiums for people in flood effected homes .
according to the annual report, just over 1. 25 million policies have been backed by flood re in this first year. it’s really good to hear that four out of five householders with previous flood claims have seen a reduction of over 50 per cent in the price of available quotes for their flood insurance .
where information has been provided, you can find out more about how they are each using the flood re scheme and where you can get a quote by using the contact details noted below .
from monday, house insurers will be able to pass on the flood risk of the policy to flood re. the householder would have the price of the flood element of their policy fixed according to the home’s council tax band. a homeowner in band awould pay £210 a year for buildings and contents flood cover, rising to £1, 200 a year for a large band h residence .
we’re helping the insurance industry to offer affordable insurance to everyone owning or living in eligible properties that may be prone to flooding .
flood re was developed following government intervention after insurers said they were no longer prepared to offer universal flood cover. billions of pounds have been paid out by the industry in recent years following a series of devastating flooding events, particularly in the north of england .
ministers concede that they must publish further details on these issues. these must be provided urgently so that parliament can scrutinise fully both the flood re scheme proposals and the measures in the water bill .
flood re, which claims to be a world first, received the final go ahead from financial regulators last week, and on monday will start accepting the first premiums and offering cover to householders .
my home was previously used for residential purposes and then used as an office. i am now returning it to be a domestic property and live in it. will i qualify for flood re ?
] this appears to produce a higher average cost per household than flood re. the abi questioned whether a method similar to that used by noah, such as the richfords model, which cedes flood risk into a mutual pool could guarantee to maintain affordable premiums. [
there remain a number of aspects of flood re that need to be agreed with parliament, the industry and the european commission. for this reason, the government also intends to use the water bill to seek powers to allow us to regulate the industry to deliver affordable flood insurance should flood re prove unworkable or fail to achieve our goals. your views on this alternative option are also invited, including in relation to how it might work if it were to be needed .
one of the key gripes about flood re, which was launched earlier in the year, was that it only offered affordable flood insurance for residential properties. this was put into particular focus by the winter floods of 2015 and 2016, when so many businesses were hit .
flood re would be a major undertaking for uk insurers and the work insurers have undertaken to get here reflects the industry' s desire to cover flood risk at an affordable price in the face of the increasing flood threat in the uk. the hard work now begins for both sides if we are to make this vision a reality .
there is also a strategic flood risk assessment for land use planning purposes that contains detailed flood risk maps and advice about what types of land uses may not be suitable in certain locations due to flood risk and where flood risk mitigation measures may be needed to make a development safe .
the flood re pooled fund will be in place for a minimum of 25 years although the total of the levy due, which has been set by an independent actuary, will be reviewed every five years .
64. the focus of evidence to us was on two main approaches' flood re' and' noah' (modified to' flood mu'). much media focus has been on the former; a model proposed by the abi. however, representatives of the insurance and reinsurance industry presented arguments to us on the merits of alternative models, including the noah / flood mu model, and flood re mutual proposed by richfords fire and flood, discussed below. media reports indicate a high level of disagreement within the sector over the best way forward. and no model garnered universal support from witnesses to this inquiry. [
customers should continue to buy their home insurance in the same way as before and all the contact will be directly with their chosen insurer. if a customer needs to make a claim, they should contact their insurance company directly. flood re works ‘behind the scenes’ with the insurance company, to reimburse them for any payments they make to their customers and so there is no need for homeowners to contact flood re directly .
through flood re, those living in high risk areas will see their insurance premiums set at affordable levels - according to their council tax band - while the same customers currently face insurance bills totalling thousands of pounds .
only properties that were built, as evidenced by the council tax register, prior to january 2009 are eligible for the scheme. however, flood re is aware of certain instances where a build had been completed in 2008 and the dwelling was used as residential premises, but a council tax band was not issued until 2009 due to a delay in administrative proceedings. in such cases, flood re will accept these premises provided that the owner can show to flood re’s satisfaction that they lived in the premises, using them as their home, prior to january 2009. this can be evidenced, for example, through furnishing a utility bill .
this week we joined a group of mps and stakeholders, including the leasehold knowledge partnership, british insurance brokers association (biba), and residential landlords association, for a meeting with the flood minister, dr thérèse coffey mp, to discuss how the introduction of flood re is impacting excluded groups (leasehold property, smes, private landlords, etc). there has always been significant dissatisfaction on our part that, whilst flood re is a positive development overall, it has left some groups outside the scheme, and possibly finding it even more difficult to get flood cover .
excesses for policies that fall into the flood re category will be capped at £250 for flood damage (currently they can run into thousands), and total premiums are calculated on a property’s council tax band. all costs to customers remain at the discretion of the individual insurers, though .
75. provisions are included in the water bill to enable direct regulation of the insurance market if flood re
does not deliver what we need and insurers are otherwise unable to keep prices at affordable levels
. [
to help improve this situation and make home insurance accessible to as many people as possible, the insurance sector set up flood re along with the government. it is the first scheme of its kind in the world .
the team' s primary responsibilities are to prepare and monitor the local flood risk management strategy, build and maintain the flood risk asset register and manage the council' s programme of flood and coastal erosion risk management work .
flood re is intended to make affordable insurance available to owners of property identified as flood - prone by the environment agency. it involves an industry - backed levy to support insurers in covering those most at risk from flooding. all uk insurers will pay into this pool to create a fund which will then be used to pay flood - related claims in high - risk areas .
yes. dwellings which form part of a single mixed - use property can be eligible for buildings / combined cover if the dwelling has its own council tax band and does not attract business rates. examples include b & bs and homes where incidental business activity takes place. however, flood re can only accept policies that fulfil the definition of a “home insurance policy”, where such policies are not being treated differently to non - flood re ceded policies .
“rsa has been involved from the point flood re was first proposed, which was about three years ago, shortly before the statement of principles was due to expire in july 2013, ” he says. “there’s been lots of complexity involved, at all points in the process - insurers, consumers and flood re itself. insurers’ information systems needed to be fully updated and there were changes needed throughout the industry, the pra (prudential regulation authority) .
one problem with extending flood re’s reach, according to its chief executive, is that the government and insurers still use language which is difficult to understand, leaving consumers confused about risks and what is available. he’s advised them to check the flood re website to see which insurance providers are now participating and to find out more. and the association of british insurers has advised people to shop around to see how this more competitive market can help them .
the flood re scheme also helps people to better understand their level of flood risk and explains how they can take action to reduce their risk, where possible. the scheme is intended to operate for 25 years, allowing time for the government, local authorities, insurers and communities to work together to improve flood preparedness. this could mean, for example, making use of effective land planning, sustainable drainage, sustainable development and effective flood - risk management .
however, the government' s announcement raises many questions about the operation of flood re, in particular how the scheme will be accountable to ministers and parliament, and how taxpayers' interests will be protected in the event of an extreme flood event requiring funding beyond the capacity of the scheme. it is unclear who will bear the costs from such a 1 in 200 year flood event .
the reason for maintaining 2009 as the cut - off point is to ensure continuity with the statement of principles which did not apply to properties built after 1st january of that year. flood re should incentivise rigorous and responsible planning decisions .
no. flood re will only reimburse insurers for damage done to contents located in the dwelling affected by the flood in question. this is because the definition of “contents” relates to the “dwelling” in which they are located and the purpose of the scheme is to help protect homes at risk of flooding and their contents .
as well as finding out what your existing insurer can offer it’s a good idea to shop around, as the existence of flood re should, over time, mean you have more choice of affordable flood cover, even if you are at high flood risk. comparison websites may not be the best way to do this if your home is at flood risk. these sites generally suit people with standard needs and insuring a property at flood risk may be best done by dealing directly with an insurer or insurance broker so they can consider your individual circumstances .
flood re would be funded by premiums paid on policies that cover high risk homes and the extra cost that goes on to normal policies to cross - subsidise the riskier policies – which works out at £8 per policy according to abi calculations .
flood re will cover policies on those properties where it can be proven that the property had been built and used as a private, residential property (i. e not a business or an office) prior to 1 st january 2009 .
despite that, plenty of insurers have been keen to quickly move customers on to the scheme. axa said last week that it was contacting all customers in flood risk areas who had bought a policy since january to encourage them to cancel it and move to a new, flood re - backed policy - penalty - free .
the cost of paying claims for widespread flood damage will be significantly reduced for insurers because the risk will now be spread across the entire industry. insurers will pay a levy to flood re, based on their total market share, and that will go into a £180m annual pot to effectively act as an insurance scheme for insurers .
craig monks, rsa’s home claims functional leader and national events coordinator, has been dealing with flood claims for the past 22 years and says the introduction of flood re will have a very real impact for people who live in high - risk areas because it will take away some of the worry that comes with sorting out adequate cover .
it’s hard to believe that flood re has been in operation for over a year, and it has just issued its first annual report. this government - backed scheme, which we’ve written about many times, was launched in 2016 after years of wrangling and is designed to provide affordable flood insurance for properties in high - risk areas .
flood re is the first scheme of its kind in the world and is a highly complex undertaking. the laying of the regulations is an important step towards enabling affordable insurance to be available for those households and families most at risk of flooding. ”
this added to the momentum for something to be introduced which would extend the reach of flood re (we wrote about this a couple of months ago). so now biba should be congratulated for sticking to its promises and finding a solution. and this doesn’t just apply to businesses: it will also offer flood cover for rented properties .
unless a new agreement is reached, insurers will no longer guarantee to offer flood cover. this could mean that upward of 200, 000 properties will be uninsurable for flood .
73. flood re would only operate for a limited time; it would be withdrawn within 20 - 25 years. whilst stating that an immediate move to a free market would cause
significant hardship for many households
, the government wished to see a
transition to a free market for flood insurance so that flood risk is accurately reflected in prices and the right incentives are in place to manage the risk of flooding
. [
] on the same day, defra launched a public consultation on how the government intended to move forward. insurers agreed to continue to meet their commitments under the statement of principles until such time as a new model, flood re, could begin operating. [
brendan mccafferty chief executive of flood re, said: “six months after launch we are pleased with the progress that has been made. those customers with the 53, 000 policies backed by flood re are now able to access more affordable cover, having previously been, in many cases, locked out of the market. the environment agency says that millions of people across the country are at risk of flooding and these people now have peace of mind that if the worst happens they will be able to benefit in future .
but however effective flood re 2 turns out to be, it won’t help if businesses haven’t got the correct insurance in the first place. a business insurance expert has recently written about what to consider when buying commercial insurance, which can be summarised as follows :
those people who pay higher premiums as a result of their home having flooded can expect their home insurance to become more affordable. this is due to a combination of insurers being able to pass the flood risk to flood re, and the policyholder now being able to shop around in a more competitive market that may have been closed to them previously .
this represents a 1. 3% chance of a flood event occurring in any one year
firstly, the new scheme for affordable flood insurance, flood re, has now been in operation for six months and apparently 53, 000 properties have been protected through it, which is great. and having started with 16 insurers, there are now 41 providing cover to high - risk properties under the scheme. but there’s still a long way to go, with an estimated 350, 000 homes which could benefit from more affordable flood insurance .
“consumers should check the flood re website to see which insurers are signed up, speak to their current insurer and be prepared to shop around. when buying a policy, they should make sure it is the best one for them, not just the cheapest. ”
getting to this stage has required compromise by both sides, and there remain issues that need to be overcome ,
he said .
insurers and the government are now working towards a shared vision, with flood re as the government' s preferred choice .
the government’s aim is that flood re should be introduced to provide protection for the most at risk properties. over 20 - 25 years, premiums will be allowed to gradually rise to market level while flood prevention measures continue to be taken, to bring insurance costs down to a reasonable level. but as the cccep report notes, flood risk is rising, losses are increasing, and there is no detailed explanation of how the scheme will be phased out .
when flood re ends, it is anticipated that there will be a system for home insurance prices that will be based more accurately on the kind of flood risks each household actually faces (known as ‘risk reflective pricing’). there is, therefore, an incentive for homeowners, local authorities and the government to take action to try and mitigate the effects of flooding .
] the company considered that reinsurance had a key role to play in managing flood re' s' survivability' (the ability to meet its obligations) and' sustainability' (the ability to survive and trade after an event). reinsurance achieved this through substantially reducing both the probability of failure and the volatility of results. the company' s early estimates were that flood re' s ability to pay out for a single catastrophic event would be some £2 billion ,
far in excess
of the scheme' s estimated premium income. [
now the two sides have struck a deal that means a not - for - profit fund - called flood re - will be built up from a levy charged on insurers to cover the cost of insuring these homes. in the meantime the current arrangements will remain in place .
another problem that cccep highlights is that a scheme like flood re sends the wrong message to the insurance market, homeowners and local authorities. the statement of principles, the agreement between the insurance industry and the government following the particularly severe floods in 2007 entails that the government continue to invest in flood defences. it is vital this continues, but by providing guaranteed reinsurance for the porperties most at risk, the sense of urgency to build flood protection measures is reduced .
i rent a property in a flood risk area. can i get still get contents insurance ?
more information on both of these documents is available on the local flood risk management strategy page .
67. however, flood re has been criticised by some in the insurance and reinsurance industry. insurance company marsh ltd suggested that the model would create perverse incentives for homes in high - risk areas not to manage their flood risk and for developers to build in such areas, prices would rise excessively as tariffs would not be contested, and reinsurance costs would be substantial. [
the flood re scheme is designed to help people who buy the buildings or contents insurance for properties which are at risk of flooding, providing they own and live in them. there is also a rule meaning you won’t be eligible if your property was built after january 1st 2009 .
but according to some recent press reports, there may be some good news for small businesses around the corner. as we wrote in may, the industry has been looking at introducing a ‘flood re 2’ to cover small businesses, and this is likely to be launched later this month .
72. after we finished taking evidence, on 27 june, the government launched a six week public consultation on its proposal to adopt the flood re model under which up to 500, 000 high risk households could benefit by paying
significantly less for their insurance than they might otherwise
. the model would also constrain the excesses that could be imposed on households at high flood risk. [
the establishment of flood re has enabled insurers to offer competitive premiums and lower excesses to high flood risk homes across the uk. six months after launch, the number of insurance providers signed up to support the scheme is now at 41, a 156% rise from the 16 which were on board on 4 april. those 41 insurance providers represent 90% of the overall home insurance market .
the government and others agreed with us that the flood insurance statement of principles established in 2000 had become unsustainable and that a new approach was needed to help households at risk of flood obtain affordable flood insurance. the statement was only ever intended to be a temporary measure and restricted customer choice as insurers only had commitments to their existing customers, and new insurers could decide to whom they offered flood insurance .
map of small to medium sized flood alleviation works (pdf 7. 79mb opens in new window )
any changes that may be needed at each five year review will reflect the need for the transition to risk reflective premiums over flood re’s 25 year existence. any changes that are considered necessary will be discussed with and approved by the secretary of state and effected through a change in the current legislation .
66. flood reinsurance is a key aspect of the model. reinsurance company, aon benfield, which has been working with the abi on the details of flood re, noted that all insurance companies in the uk buy some form of reinsurance protection for their property exposures (risks) which provides
a robust, proven, and well regulated mechanism for transferring risk and protecting insurers' financial positions
. [
“there was some discussion about whether to include small and medium enterprises but, on balance, it was decided affordable cover already exists for businesses. flood re is to protect homeowners, ” he explains. “that’s also the reason blocks of flats and leasehold properties are excluded, unless they are owner - occupied .
no. in line with its transition plan, flood re is currently carrying out research into the relative value and effectiveness of resilience measures and will report separately on its findings in due course. in the meanwhile, in accordance with the terms of the treaty, flood re will not indemnify insurers for resilient repair. the definitions of “loss” and “flood risk element” currently preclude claims payments covering betterment for the purpose of potential resilient repair. therefore, flood re will only indemnify insurers for the cost of like for like repairs and will not follow the fortunes of underlying policies even if they allow for betterment as a standard term. any payments made to an insured above the cost of like for like repairs will be borne by the insurer. for the avoidance of doubt, where building work has to be completed to a higher standard due to a change in laws or regulations, then such build difference will not be considered “betterment”, provided it is the insurer’s normal practice to indemnify such cost within a new - for - old cover.
flood re is a levy and pool system in the united kingdom , which replaced the statement of principles agreed between the government and insurance companies to provide flood insurance coverage to domestic properties deemed at significant risk of flooding ( this is generally defined as no worse than a 1.3 % or 1 in 75 annual probability of flooding ) . it is estimated that it will ultimately cover the most at risk 2 % , or 250,000 homes , though the centre for climate change economics and policy suggest 370,000 homes are eligible . 
flood re is a levy and pool system in the united kingdom, which replaced the statement of principles agreed between the government and insurance companies to provide flood insurance coverage to domestic properties deemed at significant risk of flooding (this is generally defined as no worse than a 1.3% or 1 in 75 annual probability of flooding). it is estimated that it will ultimately cover the most at risk 2% , or 250,000 homes, though the centre for climate change economics and policy suggest 370,000 homes are eligible.
flood re is a levy and pool system in the united kingdom, which replaced the statement of principles agreed between the government and insurance companies to provide flood insurance coverage to domestic properties deemed at significant risk of flooding (this is generally defined as no worse than a 1.3% or 1 in 75 annual probability of flooding). it is estimated that it will ultimately cover the most at risk 2% , or 250,000 homes, though the centre for climate change economics and policy suggest 370,000 homes are eligible.