It’s a good nine months behind the anticipated launch of July, 2015, itself almost two years after the previous insurance arrangements by providers came to an end.
Landlords of residential lettings properties need to be aware that Flood Re does not embrace their properties except in very limited circumstances, leaving them at the mercy of the open market for buildings cover. Tenants should still be able to arrange contents cover under Flood Re.
Flood Re is a complex form of reinsurance that will be funded through a levy on every home insurance policy, typically costing about £10.50 for every policy issued or around 2.2 per cent of the premium.
Insurers will sell insurance in the normal way, and have an incentive to compete for the buildings and contents business of customers with high flood risk because they know they can pass the flood component element of the policy into Flood Re, based on Council Tax band, and priced accordingly – from £210 for Band A homes to £540 for Band G homes.
Insurers will use this facility for the 1-2% highest risk homes – an estimated 350,000 to 500,000 homes – that would have struggled to find any affordable cover in a normal market. If they are flooded those customers will deal with their insurer in the usual way to get their claim paid and Flood Re will reimburse the insurer behind the scenes for the cost of the claim.
While Flood Re is being developed, ABI members are voluntarily continuing to meet their commitments to existing customers under the old Flood Insurance Statement of Principles agreement. This means they are offering flood cover to existing customers where flood risk is not “significant” according to the Environment Agency, or where the Government has announced plans to reduce flood risk below “significant” within five years. The premium and excess will not be capped, as they will reflect the insurer’s understanding of the flood risk.
While the confirmed launch of Flood Re may be good news for many of the households occupying those 350,000