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Home Insurance in flood risk area: Heard of Flood Re?

Those living on the north-west of England are still feeling the effect of Storm Desmond (5-6 December 2015) which resulted in widespread flooding. Government and insurers promised to act swiftly but what has happened since?

york-flooding-bar_3536639bA key result is that a reinsurance scheme, known as “Flood Re” is due to come into force in April 2016. This sets out to give homeowners in high flood-risk areas more options when it comes to future protection of their properties.

Those who suffered flooding know well that recovery can take years to get back to the “new normal”. Properties have to be stripped, deep cleaned, dried out and repaired. For many, Storm Desmond was not the first that homes were flooded. Some householders had only just recovered from earlier storms.

Leaving aside the physical recovery, securing future insurance coverage for homes in high-risk areas is an enormous challenge. This is where ‘Flood Re-insurance’ is designed to help. This government-backed scheme aims to provide affordable home insurance for all.

“Flood Re” is re-insurance: insurance for insurance companies. The concept is that when a homeowner makes a claim, the insurer pays the customer; “Flood Re” then reimburses the insurer. However, there is more. “Flood Re” also helps people to better understand their flood risk and how best they can take action to reduce it.

“Flood Re” is intended to operate for 25 years. This will allow ample time for the government, local authorities, insurers and communities to improve flood preparedness. But, it will need political will to take long term measures such as better use of effective land planning, sustainable drainage, sustainable development and effective flood-risk management.

How will all this be funded? The insurance industry is funding around £10m of set-up costs. There will be a “Flood Re” fund, with two sources of income: £180m levy on the insurance industry; the flood element of the policies, for which premiums will be capped according to the property’s council tax band.

As it is a reinsurance scheme, householders will not deal directly with “Flood Re”. They will seek insurance in the normal way. For this it is vital that declarations are accurate because those claimants found to have submitted false applications may find that the policy is voided if a claim is made.  The National Floor Forum offers advice on shopping for policies. The jury remains out on just how accessible and affordable this insurance will prove to be!

Former military officer; risk consultant and is involved with several voluntary groups in Rye.

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