• FAQ

Here is some further information about Flood Re and its background, what’s covered and why and funding issues.

To see in full which properties are eligible for the Flood Re scheme please click here.  

If your question isn’t answered here please contact us on information@floodre.co.uk, however, if you have a claim or any issue about your individual insurance policy please contact your insurer directly.

General

I have been flooded this Christmas and my current insurer has decided not to renew my policy. Where can I find insurance?

From April 2016 a wider number of insurers will be able to offer you flood insurance as they will be using the Flood Re scheme.  If you are struggling to find insurance cover before this date, you should try using a specialist broker who should be able to help you.  The British Insurance Brokers Association (BIBA) has a ‘find a broker’ service and if you add your postcode, select that you require buildings/ contents insurance and that you are in a flood zone you will be shown a map with brokers who will be able to help you.   http://www.biba.org.uk/CustomerHome.aspx

Why is Flood Re necessary? Why can insurers simply not continue to follow the Flood Insurance Statement of Principles that has been running since 2000?

In the face of the rising flood risk, we have estimated that 350,000 flood risk UK households would struggle to obtain affordably priced flood insurance without a scheme like Flood Re.

The Government and others agreed with us that the Flood Insurance Statement of Principles established in 2000 had become unsustainable and that a new approach was needed to help flood risk households obtain affordable flood insurance. The Statement was only ever intended to be a temporary measure and restricted customer choice as insurers only had commitments to their existing customers, and new insurers can decide to whom they offer flood insurance.

How will Flood Re work?

Insurance companies will be able to pass on the flood risk element of eligible home insurance policies to Flood Re. Flood Re will charge the insurers a premium for each policy, based on the property’s council tax band. It is estimated that insurers will pass on the flood risk element of buildings, contents or combined home insurance policies for around 350,000 households.

Flood Re will make no difference to the way customers themselves buy their home insurance. All claims will continue to be handled by the insurance companies themselves, and insurers will continue to set the premiums they charge to their customers, taking into account the Flood Re premium and other important factors (such as the risks of fire, theft, subsidence and other costs). 

As a result of the Flood Re scheme, there should be greater choice of home insurance policies for customers at risk of flooding and those policies should be more affordable.

Will the cost of home insurance fall as a result of Flood Re?

Those people who pay higher premiums as a result of their home having flooded, could expect their home insurance to become more affordable.  This is due to a combination of insurers being able to pass the flood risk to Flood Re, and the policyholder now being able to shop around in a more competitive market that may have been closed to them.

Flood Re will not set prices for home insurance, but will give insurers the opportunity of passing to them the flood risk element of a home insurance policy (buildings and contents) at a premium that will be capped, depending on the Council Tax band of the property. It will be up to an insurer to decide if they wish to pass the flood risk element of the cover to Flood Re.

What is being done to prevent flood damage in the first place? Doesn’t this scheme just encourage insurers to keep paying out?

Part of the Flood Re scheme includes offering help to people to increase their understanding of their level of flood risk and explaining how they can take action to reduce their risk, where possible. Flood Re will only operate for 25 years, allowing time for the Government, local authorities, insures and communities to become better prepared for flooding. This could mean, for example, making use of effective land planning, sustainable drainage, sustainable development and effective flood risk management.

When Flood Re ends, it is anticipated that there will be a system for home insurance prices that will be based more accurately on the kind of flood risks each household actually faces (known as ‘risk reflective pricing’).There is, therefore, an incentive for homeowners, local authorities and the government to take action to try and mitigate the effects of flooding.

Will customers need to have any direct contact with Flood Re?

Customers will continue to buy their home insurance in the same way as before, and all the contact will be directly with their chosen insurer.  If a customer needs to make a claim, they should contact their insurance company directly, just as they do now. Flood Re will work ‘behind the scenes’ with the insurance company, to reimburse them for any payments they make to their customers and so there will be no need for homeowners to contact Flood Re directly.

Funding

How is the scheme funded?

Flood Re will charge insurers a fixed premium based on council tax band.  In addition, Flood Re will charge an insurer an excess of only £250 per policy. To cover the shortfall between the estimated cost of flood damage and the new, lower premiums and excesses, insurers will pay Flood Re a levy of £180m per year.

Insurers will remain responsible for pricing and will decide how best to pass on the benefits of lower premiums and excesses charged by Flood Re to customers. For futher information in the funding structure click here 

What does the scheme mean for customers? Will insurance premiums be capped?

Insurers will still be in control of pricing for overall home insurance. Flood Re will charge a fixed premium per policy to insurers, relating to the flood element of the policies transferred to Flood Re. These premiums will be lower than would be the case if the flood risks were fully taken into account, as contributions to the costs will come from a statutory levy on all home insurers in the UK.

Flood Re also offers insurers an excess per policy of £250. Although Flood Re has no control over the way insurers set the excesses for individual customers, this mechanism should benefit people living in areas at risk of flooding.

What happens if there is a large flood in the early years of the scheme – will there be enough money in the fund to pay claims?

Yes, Flood Re will purchase its own reinsurance and hold reserves and capital so that it can fully cover all claims in at least 99.5% of years.

With Flood Re being reviewed every 5 years, what guarantee is there that the level of the premium cap and/or the levy will not increase in the future?

Any changes that may be needed at each 5 year review will reflect the need for the transition to risk reflective premiums over Flood Re’s 25 year existence.  Any changes that are considered necessary will be discussed with and approved by the Secretary of State.

Eligibility

Will my caravan be covered under the Flood Re scheme

If you have a static caravan and it has a council tax band then your caravan will be eligible for Flood Re. 

However, if your caravan is part of a commercial caravan park and let out as a business it will not be included.  If you own a caravan which sits on your drive and you use it for holidays then this will be covered either under your motor insurance or a separate caravan policy and therefore will be excluded from Flood Re.

My property is termed 'medium' risk and as such I cannot find affordable home insurance. Will Flood Re cover me even though my home is not deemed to be a high risk property?

The assessment of the level of flood risk is not part of the decision making process as to whether your property is eligible to benefit from Flood Re.  To be eligible for Flood Re your home must have been built before 1st January 2009, be insured by the individual home owner (not a company) and have a council tax band.  If those key conditions are met then you will be able to benefit from Flood Re via an insurer who is participating in the Flood Re scheme.

Why has the decision been taken to include Band H and I properties within Flood Re?

The decision to exclude Band H homes was originally taken by Ministers who felt it unfair that lower income flood risk households should subsidise higher income households. However, of course, the impact of a flood can be no less devastating for Band H and I homes and we welcome their inclusion in Flood Re.

Why are small businesses not included?

Small and medium enterprises (SMEs) and leasehold properties are not included in Flood Re, because there is already an effective and competitive property insurance market covering them. Neither the ABI, nor the Government, is currently aware of any evidence to suggest that affordable flood insurance will cease to be widely available for them in the future.

Why hasn’t the scope of Flood Re been extended to include properties built after 2009?

The reason for maintaining 2009 as the cut-off point is to ensure continuity with the Statement of Principles which did not apply to properties built after 1st January of that year. Flood Re should incentivise rigorous and responsible planning decisions.