Flood Re Agreement Guarantees Cover for Homes at Risk of Flooding

Sand bags floodGreat news for homeowners living in flood risk areas: the government and the insurance industry have finally come to an agreement over the best way to provide affordable insurance for properties at risk of flooding. A tentative agreement named ‘Flood Re’ was first put on the table in June 2013 and after eighteen months of hard work it’s now ready for implementation.

Last year’s winter storms, and the wettest January on record, wreaked havoc across the country causing widespread coastal and inland flooding. Thousands of homes were left ruined with swathes of the Somerset Levels, The Thames Valley and The Severn Valley disappearing underwater.

Once the flood waters had subsided homeowners in vulnerable areas were left worrying whether they would be able to insure their properties. Stories about insurance policies costing six figures, and sky high claims excess fees, soon hit the headlines.  Now that the Flood Re agreement has been finalised homeowners can enjoy some long overdue peace of mind.

How will Flood Re work?

  • Flood Re is a ‘reinsurance scheme’ that will provide a central fund to payout flood claims
  • Insurers pass on the ‘flood risk element’ of a policy to Flood Re and premiums are then calculated according to usual risk factors
  • The’ flood risk element’ is priced according to Council Tax Bands with Bands A&B set at a maximum of £210 per year rising to Band G set at a maximum of £540 per year
  • It’s estimated that between 300,000 – 500, 000 UK homes could benefit from Flood Re

How will Flood Re be funded?

  • The Insurance industry has already invested £17million in setting-up Flood Re
  • The pooled funds will come from two sources: The ‘flood risk element’ of a policy (mentioned above) and a 2.2% levy on every home insurance policy that’s sold in the UK. The levy averaging £10.50 per household equates to the amount already being paid to cross subsidise flood risk; so homeowners shouldn’t see a rise in premiums (it’s just a way of formalising the current state of play).
  • The Flood Re scheme is likely to be up and running by the second half of 2015

 Who’s covered by Flood Re?

As part of the final agreement it was decided that homes in the highest Council Tax Bands will now be included (Band H in England and I in Wales)

Small businesses, private landlords and properties built since 2009 are not included in the agreement (the latter to discourage development on flood plains)

If you live in a flood prone area and are looking for affordable home insurance Quoteline Direct can tailor a quote to fit your individual needs. To find out more visit our Flood Risk Insurance page or Tel: 0161 874 4171 to speak with a consultant and get a quote.

 


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