What’s Flood Re?
Flood Re featured heavily in the press earlier in the year. It was created in April 2016 to help homeowners in areas susceptible to flooding obtain affordable home and contents insurance.
In simple terms, Flood Re is a new reinsurer set up to take personal home related flood risks from other insurance companies. So far just over 30 household name insurers have joined the programme, and more are expected to follow suit. For individuals, Flood Re operates behind the scenes, you deal with your insurance company as usual, paying your premiums and receiving any claims.
As yet Flood Re is not open for commercial business.
Flood Re is different from other reinsurers in that it has been set up as a ‘not for profit organisation’ and is principally to keep the insurance market open to around 350,000 consumers in high risk areas.
It gets its income from two sources. First, an element of household premium deemed to be for flood risk is ceded to Flood Re from the individual insurers. This is supplemented by a new Government levy on home insurers which is forecast to raise an additional £180m annually.
For it to work efficiently, the more insurers that use Flood Re, the greater its financial resilience will be. This in turn, the Government hopes, will benefit the consumer, with those worst hit still able to find cover and for others, lower premiums.
Flood Re has initially been set up with a fixed life, taking it through to 2039. We’d suggest that assuming the system works well it is likely to be extended in some shape or form beyond that.
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