Flood RE

Flood Re Explained

Over the last couple of years we have seen on the news just how devastating flooding can be. According to the Environment Agency (EA) there are over 5 million properties in the U.K that are at risk of flooding and this number is growing.

In June 2013 it was announced that the Association of British Insurers (ABI) and the government agreed to a memorandum of understanding to ensure that flood insurance continues to be affordable and available to private households in flood prone areas. The press at the time highlighted that individuals in flood-prone areas were being heavily penalised if their home was deemed to be in a high risk flood area (even if their home has never actually flooded). Some people were unable to obtain flood cover with their household insurance. Flood Re has therefore been implemented from April 2016.

What is Flood Re?

Flood Re is managed and owned by the insurance industry and is directly accountable to Parliament. It is funded by an annual levy on insurance companies which will mostly be passed on to the consumer. Flood Re is designed to cover homes at high risk of flooding. Insurers will place these high risk homes, into a fund. These are properties they feel unable to insure themselves. There will however be some exclusions for access to Flood Re:

  • Homes in England’s highest council tax band, H.
  • Equivalent properties in Wales, Scotland and Northern Ireland.
  • Homes built after 1 January 2009.
  • Small businesses and charities as well as let and commercial properties.

The Flood Re levy should raise £180m each year.

Insurance Implications

The introduction to Flood Re is particularly beneficial to households living with a high risk of flooding. Whilst both brokers and customers might have struggled in the past to access affordable cover, Flood Re has opened up the market to be able to ‘shop around’. Whilst your home may not be a flood risk, everyone is responsible for the payment towards Flood Re.