Many people must be concerned about the recent flooding and the availability of flood insurance in the future. Having flood cover is normally a requirement of any mortgage lender, so being unable to obtain insurance cover will affect the value of the property.
Flood Re is due to become operational in April, 2016. It is a non-profit reinsurance fund, owned and managed by the insurance industry, and established to ensure those domestic properties in the UK at the highest risk of flooding can receive affordable cover and manageable excess for the flood element of their household property insurance.
It is estimated that around 350,000.00 properties will placed with Flood Re, representing the 1-2% of properties at the highest risk of flooding in the UK. The premium will be based on the council taxing banding of the property.
In two ways. First, the flood element of the premium will be passed to Flood Re in respect of those properties placed in the fund. Second, a general levy on the insurance industry. The general levy will be payable on all domestic home insurance policies by the policyholder.
Policyholders will claim from their insurance company in the normal way and Flood Re will reimburse the insurer behind the scenes.
Flood Re should make obtaining insurance for domestic properties affected by flooding more affordable. This is due to insurance companies being able to pass the flooding risk to Flood Re and policyholders being able to shop around in a more competitive market that may previously have been closed to them.
Businesses are not included in Flood Re. At the time of writing, discussions are taking place as to whether small to medium sized businesses can be included.
Flood Re is only a part solution. Better flood defences and land management are critical factors. Discussions are also taking place regarding making properties more flood resilient, perhaps by using different building materials.
Peter Jenkins