Search

How can we help?

Icon

A flood of claims

Before the recent decision to name our storms, the number of flooding incidents over recent years has pushed up premiums for flood risks to uneconomic levels.  A long term solution to this problem has been in the making since 2011 for at risk properties.  Last November, regulations were made which bring closer the advent of a proper flood insurance scheme.

The scheme will be called “Flood Re”.  Approval from the Prudential Regulation Authority (the UK regulator responsible for the prudential regulation of systemically important financial institutions) is needed before Flood Re can begin to offer cover, which is expected to be in place in around April this year.

In brief, in situations where an insurer is not prepared to underwrite the risk of flooding themselves, Flood Re will provide insurers with the opportunity to buy subsidised reinsurance against flood risks.  The scheme has an expected lifespan of 25 years and is to operate for the highest 1-2% riskiest properties – around 350,000 homes in the UK.

Premiums will be set by reference to the Council Tax band of a property and will be capped.  The detail is in the regulations.  The excess payable for claims under Flood Re policies will initially be limited to £250 or, if higher, the excess applied by the insurer under the policy.

Not all properties can benefit from Flood Re insurance.  Those that do not qualify will need to obtain flood insurance cover in the open market.  The properties that do not qualify include:

  • All commercial and mixed use properties.
  • Any residential property built since 1 January 2009.
  • Buy to let residential properties where the landlord arranges the buildings insurance.
  • Purpose built flats and most houses converted into flats.

These properties will continue to be subject to market-driven premiums and excesses for flood cover.

In situations where an insurer is not prepared to underwrite the risk of flooding themselves, Flood Re will provide insurers with the opportunity to buy subsidised reinsurance against flood risks.

It will be necessary for buyers of property to ascertain the level of risk of flooding for that property and to make enquiries as to the availability of insurance within the Flood Re scheme.  If it is not available, it will be necessary to consider whether insurance can be obtained at a rate which is economically viable.

The £10 million setup cost for the scheme is being paid for by the insurance industry and Flood Re, which will operate as a none for profit organisation, will be financed annually out of a levy payable across the insurance industry in addition to the premiums collected.

Flood Re is good news for many owner/occupiers of residential property.  The categories of property excluded are wide and it therefore remains to be seen in the medium to long term, whether properties which have a high risk of flooding can remain to be viably insured where they are not covered by the scheme.

For advice on the application of the Flood Re scheme or of the flooding risk for a particular property, please contact Simon Ralphs.

About this article

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

art
  • 12 June 2024
  • Privacy and Data Protection

UK data protection: Important basics

Sometimes, data protection can seem like unhelpful red tape. At other times, it is critical to cultivating a trustworthy reputation.

art
  • 11 June 2024
  • Immigration

UK Immigration Roundup – May to June 2024

As the UK approaches the upcoming general election, immigration remains a focal issue in political discussions. The Conservative party’s recent proposal to cap visas for skilled migrant workers has alarmed various industries who are concerned that a limit to migration could harm vital sectors of the UK economy.

Pub
  • 06 June 2024
  • Employment

Talking Employment Law: What does the new Worker Protection Act 2023 mean for employers?

In this podcast, Lucy Densham Brown and Shauna Jones, members of the employment team, will review the new Worker Protection Act 2023 and provide some guidance on how employers should review their policies in preparation for October.

art
  • 03 June 2024
  • Commercial Real Estate

Sustainability and commercial property: green leases  

Climate change is considered by many the biggest threat we are facing today. With the UK said to have one of the oldest housing/building stocks, the focus on a building’s environmental performance and sustainability has never been more critical.

art
  • 03 June 2024
  • Employment

Using AI technologies in recruitment: is it fair and transparent?

In a rapidly evolving digital landscape, where artificial intelligence (AI) plays an increasingly pivotal role in HR and recruitment processes, ensuring responsible and ethical implementation is paramount.

Pub
  • 03 June 2024
  • Employment

Navigating the Labour Party’s New Deal for Working People: Legal implications and opportunities

Join Monica Atwal and Amanda Glover, for this in-person seminar on ‘Navigating the Labour Party’s New Deal for Working People: Legal Implications and Opportunities’ at our Reading office on Thursday, 20th June.