Flood Re – UK Flood Insurance

“Flood Re” is the name given to the new UK flood insurance policy.

The new policy is the long awaited replacement to the Statement of Principles agreement that was set up between the UK government and the ABI (Association of British Insurers) in 2008. This agreement aimed to keep insurance costs down for those households in flood risk areas. The ABI agreed to offer such households affordable home insurance in return for the government to develop new and reinforce existing flood defences.

The agreement was due to end in June 2013, although this was extended to July 2013. For the last 12 months confusion and panic has replaced the security offered by the Statement of Principles as the government continued to delay announcing a replacement plan.

New Agreement
The new plan will enable insurers to continue to offer affordable home insurance to those households in high risk areas. It will work by building up a not-for-profit fund (Flood Re) to cover the costs of insuring flood risk homes. The fund will come from a levy charged on household insurers.

According to the Guardian:

…all UK household insurers will have to pay £10.50 each into a fund that can be used to pay claims for people in high-risk homes. But the insurance industry said this already happened informally now, so general premiums should not rise. The scheme will operate for 20-25 years, after which home owners will be expected to protect themselves.

This new agreement between the government and the UK insurance industry will keep flood insurance premiums down to affordable levels. The costs of insurance for flood risk homes will be linked to local council tax bands (local government tax levels). Flood risk households in larger, more expensive homes will therefore expect to pay higher insurance costs than those in smaller homes in lower council tax bands.

Sources: The Guardian, BBC, Gov.UK

One thought on “Flood Re – UK Flood Insurance

  1. This post is indeed very informative. This is indeed good news for policy holders. This “not for profit” scheme seems pretty interesting. I really find this beneficial to all policy holders. I’m glad this idea sprouted for the benefit of the people.

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