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Introducing Flood Re

A new solution to the long-standing problem of availability and affordability of flood insurance, likely to benefit 350,000 households.

Flooding is a significant problem and it is forecast to get much worse with climate change. In the UK, 5.2 million domestic properties are at risk of flooding and projections show that rising sea levels and higher frequency and severity of rainstorms could lead to another 500,000 more properties being at ‘significant’ risk of flooding by 2035.*

We’ve all seen how devastating a flood can be, not only as they happen but also in the aftermath, as people struggle to find affordable insurance for homes. Storms Eva, Desmond and Frank brought widespread flooding to the north of England, Scotland, north Wales and parts of Northern Ireland throughout December 2015 and January 2016. In total, the government has confirmed that around 16,000 properties in England were flooded, during the wettest December in a century. 

Following the increase in the number and severity of flood events in recent years the continued general availability of domestic flood insurance at reasonable cost has come under a great deal of pressure. That’s why the government has been working more closely with insurers in the UK, delivering a new way of dealing with offering flood cover on home insurance through a not-for-profit scheme that’s funded by insurers.

Launch of a ‘world-first’ scheme

Flood Re is one of the most significant innovations ever to be introduced into the home insurance market. It has been designed to make affordable insurance cover widely available to UK householders who live in private residential homes at risk of flooding.

It's brilliant, this is wonderful news for anyone living in a home like mine. We can get back to normal again.

Sue, whose house has flooded 4 times in 10 years

Discussions about setting up Flood Re began in 2009 but it was a further five years until the Water Act 2014 was passed which paved the way for the Flood Re scheme. 

Capita was awarded the contract in January 2015 to design, build and operate the start-up reinsurance business. The team delivering the project has been drawn from different areas of Capita working alongside our partners at Landmark Information Group. 

The delivery of a wide variety of functions has contributed to the successful launch of the scheme, such as running the service desk for industry participants, building and testing the property data hub, developing the IT infrastructure and support, working closely with the Flood Re actuarial team developing their models and managing the finance function including invoicing insurers for their levy contributions. 

The scheme went live on 4 April 2016 and is already accepting bordereaux from insurers.

Capita brought an impressive set of capabilities along with a good understanding of our objectives. They mobilised a highly experienced team and played an essential role in ensuring we launched on time. We appreciate their support, pragmatism and dedication to making Flood Re a reality.

Brendan McCafferty

CEO, Flood Re

Flood Re is in place until 2039 and:

  • enables homeowners to find affordable insurance if an eligible property is at risk of flooding
  • helps tenants to find affordable contents insurance if they live in an eligible property
  • helps local authorities and communities across the UK to be better prepared for flooding
  • creates a ‘level playing field’ for UK insurers, which means they can still offer homeowners an affordable range of appropriate policies to those homes at risk of flooding.

How Flood Re works

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 raising £180m every year and by individual reinsurance premiums paid to Flood Re by insurers, on ceded risks.

Customers buy their home insurance in the same ways as they did previously, whether through a broker, direct or through a price comparison website, but the flood risk element is passed on to Flood Re.

Insurers are solely responsible for setting the price householders pay for their cover and take into account the premium paid to Flood Re when doing this. Premiums for the flood risk element are based on the Council Tax band and priced accordingly from £210 for Band A to £1,200 for Band H.

Flood Re’s scope is to accept private residential household insurance policies only as this is where it was accepted by the insurance industry and government, that there was an emerging market failure to deliver affordable flood insurance. Flood Re does not cover commercial property. Properties built on or after 1 January 2009 are also excluded so that Flood Re does not incentivise further house building in areas of high flood risk.

Introducing a new era of more affordable insurance

  • Brokers are able to build propositions and new opportunities for those customers living in high risk flood areas, price risks more competitively and decline fewer risks.
  • Insurers can review their flood risk strategy, offer more competitive premiums in areas liable for flooding and expand the amount of flood risk they offer. Flood Re provides a benchmark which makes it much easier for pricing flood risk.
  • Customers living in high risk flooding areas benefit from an increase in availability and choice of insurers resulting in more affordable premiums.

Good news for homeowners

Sue Cashmore, chair of the Cockermouth’s flood action group, has seen her insurance premium drop more than £3,000, as a result of the launch of the Flood Re scheme. Sue's house has flooded four times in the past 10 years and she has not been able to afford insurance since 2011.  She has now secured insurance for £400 with an excess of £250. She said: "It's brilliant, this is wonderful news for anyone living in a home like mine. We can get back to normal again."

* Environment Agency 2014

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