Find out more about Flood Re

Posted on: 09 March 2016

Image of a glass of water

For people living in flood risk areas, finding affordable household insurance is a longstanding problem and is becoming increasingly difficult. The UK government and the ABI have responded by setting up Flood Re, which aims to make domestic flood insurance more available and more affordable. It should help insurers provide cover for around 350,000 private homes. Flood Re is due to launch in April 2016. In the following article, we aim to tell you what we know about Flood Re and point you in the right direction to find out further information.

Context – the UK domestic flood risk

In the UK, 5.2 million domestic properties are at risk of flooding; 2.4 million of which from river or coastal flooding, 3.8 million from surface water flooding. And a massive 1 million domestic properties are at risk from river, coastal AND surface water flooding. The problem is already large and is growing – climate change means that 500,000 more properties will be at ‘significant’ risk of flooding by 2035.

So, what is Flood Re?

Flood Re is a specially created company that is designed to create a reinsurance pool solution. It is owned and operated by the insurance industry with accountability to government. It should enable the provision of affordable flood insurance cover to domestic property owners which are at significant risk of flooding. For insurance providers like Home & Legacy, it should mean that we will become more able to quote on flood risks as our insurance capacity providers have access to flood reinsurance, rather than having to pay out for the flood part of claims themselves.

A diagram on Flood Re’s website clearly shows the process.

Flood Re will have a life span of 25 years, after which the insurance industry will be expected to resume offering flood insurance on a free market basis.

Which properties will be eligible for Flood Re?

  • Those insured in the name of individuals
  • Built prior to 1st January 2009
  • Residential properties only – including holiday homes and second homes
  • Occupied by the owner or their immediate family
  • Located in the UK – Channel Islands and Isle of Man are excluded
  • Tenant’s contents in domestic rental properties

How is Flood Re being funded?

The funding comes from 2 sources:

  1. A levy that all UK domestic property insurers will pay annually of approx. £180million. Our research indicates that most insurers will pass the cost of this levy onto their customers as a price increase of around 2.5%
  2. A ceding premium payable to Flood Re on individually ceded risks

The ceding premium is fixed according to council tax band, as follows:

Council Tax Band A,B C D E F G H
Buildings policy £132 £148 £169 £199 £260 £334 £800
Contents policy £78 £98 £108 £131 £148 £206 £400
Combined policy £210 £246 £276 £330 £408 £540 £1,200

What next?

Flood Re is due to go live next month – in April 2016. Insurers in the UK are working hard to update their systems and be ready.

If you live in a property that is at risk of flood you may have many more questions, such as will Flood Re make my home insurance cheaper? And why are properties built after 2009 excluded?

To find out the answers to these questions and many more, visit the Flood Re website.

Or email information@floodre.co.uk

You can also find out more from the Association of British Insurers.