Flood Re Update

Flood Re Update

Following the aftermath of the 2007 flooding, the Government called for the insurance industry to step up with regard to future flooding cover. Since these floods, the UK has witnessed many more major incidents, most recently over December 2015 and into 2016, these have been estimated by the tabloids to be costing the UK around £5-6billion.
What is Flood Re?
Flood Re is a not-for-profit fund that was established in 2011 as a collaboration between the Government and the Insurance industry, to provide affordable cover for the worst 1-2% of those living in areas at high flood risk.
"The impact of Storms Desmond, Eva and Frank have been devastating and I express my sympathy for those who've had their homes flooded. 
I want to reassure homeowners that Flood Re is on track to start accepting policies from insurers in April. This will give people access to more affordable flood insurance ensuring that the insurance safety net continues to be in place for the future, even if your property is at a high risk of flooding."
Brendan McCafferty - CEO, Flood Re
This new scheme is a replacement of the Flood Insurance Statement of Principles that has been running since 2000, as this was only ever meant to be a temporary measure which has now become unsustainable.
Flood Re will be in place for 25 years and it is designed to promote the availability and affordability of flood insurance, which will be funded by a levy on all home insurers (an average of £10.50 a year), regardless of whether they live in flood-prone areas. To those who query about having to pay the levy, the ABI (Association of British Insurers) have pointed out that there has always been some subsidy between low and high flood-risk policyholders, adding that many people are still at risk from flooding even if they are not living near a river or the sea. It is estimated over that time around 350,000 homes may benefit as a result of the scheme.
Who has access to Flood Re?
To be eligible for the scheme, the property must be under private household insurance as Flood Re will not cover businesses. Also, the property must have been built before 1st January 2009 as Flood Re does not want to incentivise the building of more houses in areas of high flood risk. Unfortunately, Flood Re will not resolve any issues involving commercial property. This means that the whole commercial sector, including residential letting properties, falls outside the Flood Re remit. 
It has been said that Flood Re will be able to cover every situation regarding flooding up to, what they described as, a one in 200-year event. This would be the equivalent of a flood six times greater than the ones that hit the UK in 2007, which has been described by the ABI (Association of British Insurers) as “very unlikely”. 
It remains to be seen whether the release of capital that would normally be reserved for catastrophic flood events will translate into a more flexible underwriting approach in the commercial property sector.
What next?
If you would like to find out more about Flood Re and how these changes might affect you, please do not hesitate to contact us.
01789 761 660

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