Yesterday the UK government and Association of British Insurers (ABI) announced the final agreement securing the development and delivery of Flood Re, the new flood insurance scheme for the UK. Everything now looks set for Flood Re legislation to be laid in Parliament and come into operation some time in 2015.
Flood Re’s Chief Executive, Brendan McCafferty said, “My top priority when I became CEO in November was to lead Flood Re through the negotiation of some very difficult issues. I am very pleased that we have reached a deal that will work for Flood Re, insurers, government and, most importantly, consumers”.
Flood Re – The Pooled Flood Insurance System
Flood Re is described by ABI as a “pooled insurance system”. People in flood risk areas will be better protected against spiralling insurance costs. Flood Re will allow even the highest risk homes to insure against floods. It is considered to be one of the first of its kind in the world.
Flood Re will provide a fund that will pay out claims made by those flood risk households who without it would likely struggle to be able to get or afford flood insurance. ABI estimate between 300,000 -500,000 homes could benefit from it.
More Properties to be Eligible
After ongoing negotiations with the Association of British Insurers (ABI) and Flood Re, an agreement has been reached on a number of matters regarding how Flood Re will operate.
As part of the package of measures, the criteria has been widened to include further properties that will be eligible for Flood Re. In particular this means the inclusion of properties within council tax bands H and I (higher capital value homes) in the scope of Flood Re.
According to the government, this received wide support in the public consultation and from the insurance industry, which has agreed to fund this without passing costs on to other consumers.
Legislation Expected in 2015
Yesterday’s agreement will enable legislation to be laid in Parliament next year and – once approved by the financial regulators – enable Flood Re to operate as a reinsurer.
UK Environment Secretary Elizabeth Truss said:
“Whilst nothing can take away the distress that flooding can cause, having access to affordable insurance will give people peace of mind.
For the first time, we will ensure access to affordable flood insurance for people regardless of where they live. I’m delighted that we are one step closer to making this a reality and protecting people from spiralling insurance premiums”.
The UK suffered some of the worst flooding in recent times, during the summer of 2007 and the winter of 2013 to 2014.
One in 6 Properties at Risk of Flooding in England
Environment Agency’s National Assessment of Flood Risk (pdf) of 2009 said that:
…around 5.2 million properties in England, or one in six properties, are at risk of flooding. More than 5 million people live and work in 2.4 million properties that are at risk of flooding from rivers or the sea, one million of which are also at risk of surface water flooding. A further 2.8 million properties are susceptible to surface water flooding alone.
