Aidan Kerr, Director of Operations at Flood Re, at Ambiental’s Flood Re Business Breakfast for Insurers and Reinsurers
In the penultimate of a series of blogs following Ambiental’s breakfast event for insurers and reinsurers, we take a look at Flood Re itself, and find out what the introduction of the reinsurance pool will mean for UK flood risk analysts and insurers.
When it comes to flood risk, one factor is becoming increasingly undeniable; climate change. Sea levels are rising, and the risk of coastal flooding is increasing; the frequency and severity of rainstorms is set to increase, highlighted perhaps by the recent spate of storms and flood events across Northern England, and the risk of inland flooding will only grow in the years to come. Without investment, it is suggested that 500,000 more properties across the UK will be at ‘significant’ risk of flooding by 2035, and thousands of homes may be rejected as uninsurable.
But what can be done about it?
The introduction of Flood Re in April 2016 is the answer to the long-standing problem of available, and affordable, flood insurance in the UK for those homeowners in high flood risk areas. The scheme is likely to benefit half a million households, and will be owned and operated by the insurance industry, and regulated by the UK government in much the same way as other reinsurance bodies are. From the customer’s point of view, the introduction of Flood Re will be a smooth transition, with no change in customer experience at point of sale or during the claims process, and insurance will continue to be purchased as usual.
Speaking after the breakfast event, Flood Re’s Director of Operations Aidan Kerr said “We estimate that between 300,000 and 500,000 properties could benefit from Flood Re, and Flood Re is in there for 25 years, so it will really be a massive solution to one of the biggest consumer issues facing home insurance customers in the UK.”
He also highlighted climate change as one of the main challenges facing the insurance industry, adding, “Flood Re can’t stop flooding, but it can provide piece of mind for those affected. Following the flooding across Cumbria and Lancashire, 5,000 homeowners will be concerned about how they are going to get an insurance renewal, and how affordable that will be.
Flood Re is an operation, and as long as all the insurance industry is signed up for it, then that will become one less worry for all the people who are now mopping out their properties, and trying to save their position to make a claim. Flood Re will make the problem of finding affordable home insurance a thing of the past for people at risk of flooding.”
Watch the video of Aidan Kerr’s speech at the Flood Re Breakfast Event
What Flood Re means to insurers
As the overall owners of the scheme, insurers, and not Flood Re will set the retail prices, and it will be down to the insurer to decide which risks they will cede to the pool. In the event that a customer makes a valid claim, Flood Re, after collecting a levy of £180 million every April from all relevant insurers, will pay all flood claims directly to the insurer, which will then be passed on to the claiming customer, as normal.
For each policy ceded to Flood Re, a ceded risk premium is charged to insurers at a fixed price, according to council tax bands. In addition to this, all relevant insurers must pay the set levy, and should be aware that Flood Re maintains the capacity to call a second levy from UK household insurers if required. This will mean however that Flood Re will cover the majority of residential properties; only those built on or after 1st January 2009, leasehold properties, and small businesses will be exempt from the scheme.
Speaking about what he hoped to achieve by speaking at the breakfast event, Aidan said, “The key objective is to make sure that the momentum that we have got in making Flood Re a reality, is continued. Flood Re will be ready for launch on April 4th, but it will only be successful if the insurance industry is also ready for launch on April 4th. We want to make sure that whatever way insurers sell their products to customers, be it directly or through a broker, they’re ready for flood re, so that customers at risk of flooding can benefit.”
With the first levy due in less than two months, Flood Re is urging insurers to engage in Flood Re, building and testing infrastructure to cope with its arrival, and communicating with customers to keep them updated on the upcoming process.
For more information on how Flood Re will work with the insurance industry and benefit homeowners visit their website at www.floodre.co.uk.
For more information on how Ambiental’s flood risk analysis and data products can help the insurance industry make better decisions regarding whether to cede or nor cede properties to Flood Re please call Mark Nunns on 0203 857 8545 or email [email protected]
About the Author
Sarah Gaunt is a freelance writer, and is responsible for producing blogs and news updates on behalf of Ambiental. With a background in natural sciences, Sarah has produced features and podcasts for a variety of press offices, and has published articles in several online and print magazines.
Flood Risk Management
Understanding flood risk and how best to protect communities, infrastructure and individual properties anywhere in the world.
FloodScore™ Property FloodScore™ Property provides property-level flood risk scores and flood risk information for all properties in England, Scotland, Wales and Northern Ireland.
FloodScore™ AAL Risk Rating Layers
GIS spatial layers reflecting the average annual loss (AAL) and flood risk score for all commercial and residential properties in the UK.